Best Secured Credit Cards in Canada for May 2024

When determining a rating for individual credit cards, the Forbes Advisor Canada editorial team factors in an exhaustive list of data points. With secured credit cards cards, the scoring model used takes into account factors such as interest rates, annual fees, earning potential for rewards and cash back and credit bureau reporting. Keep in mind, what may be best for some people might not be right for you. Conduct informed research before deciding which cards will best help you achieve your financial goals.

Neo Secured Mastercard

The Neo Secured Mastercard is a no-fee card that earns competitive returns while rebuilding credit.

Rewards: Earn up to 5% cash back at retail partners and 0.5% on all other purchases.

Welcome Offer: $25 customer sign-up bonus

Annual Fee: $0

Other Benefits and Drawbacks: Few secured cards earn rewards, let alone guarantee 0.5% cash back on top of a 5% average earn rate. Members even get a top-up when cash back falls below 0.5% ($50 monthly limit). There are no annual fees and only a $50 security deposit, which is much lower than most comparable cards that require $300 or more. Adding insurance and Equifax reports would give this card an edge against the competition.

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Home Trust Secured Visa Card

The Home Trust Secured Visa Card is an ideal choice for individuals who can benefit from lower interest rates.

Rewards: None.

Welcome Offer: None.

Annual Fee: $59

Other Benefits and Drawbacks: Cardholders will only pay 14.90% compared to 17.99 to 19.99% on other secured cards. Lower interest rates are a nice safety net for statements that can’t be paid in full because of an emergency or unplanned expenses. Although, this added assurance might not hold enough value in place of a rewards program offered by competing cards.

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Home Trust Secured Visa Card (No-Fee Option)

The Home Trust Secured Visa Card (No-Fee Option) can offer a safe way for students to establish a credit history.

Rewards: None.

Welcome Offer: None.

Annual Fee: $0

Other Benefits and Drawbacks: Credit limits are set by the security deposit amount to provide more control over spending habits. Any unauthorized charges are covered under the Visa Zero Liability Policy. Interest rates are on the high side of secured cards but only apply when there is an unpaid balance. Purchase or travel insurance would be a welcomed addition.

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Capital One Guaranteed Secured Mastercard®

The Capital One Guaranteed Secured Mastercard offers built-in purchase security and travel insurance for rental cars and baggage delays.

Rewards: None

Welcome Offer: None

Annual Fee: $59

Other Benefits and Drawbacks: Rewards still don’t make the cut, but there are some notable benefits that competitors are lacking. Beyond purchase and warranty coverage, customers also get 60 days of price protection. This service pays the difference on new items that drop in price within 60 days of purchase. An interest-free grace period and basic travel insurance round out the list of impressive features.

A secured credit card requires a cash deposit upfront. The deposit is used as collateral, meaning, if you don’t pay your bill, the credit card provider will use this to cover your balance. These cards are typically used when you have a credit score that needs improvement.

How Does a Secured Credit Card Work?

When you open a secured credit card, you provide a deposit. This deposit typically corresponds to the card’s limit. For example, if you put $1,000 down, your card will have a $1,000 limit. You can use and pay off the credit card just as you would a conventional card. However, if you fail to pay off your credit card, the credit card issuer will eventually use your deposit to cover your balance. This provides security to the credit card provider, allowing them to provide a credit card option to those with bad credit, who are typically higher risk. If you pay off your balance, your deposit will eventually be released to you when you close the card.

What Is the Security Deposit for a Secured Credit Card?

Most secured credit cards require a minimum deposit of $50. Typically, your deposit corresponds to your credit limit, so the larger the deposit, the larger the limit.

Secured vs. Unsecured Credit Cards

A secured credit card is one with a deposit provided as collateral to the credit card issuer and serves as your line of credit. In the event you are unable to payback your balance (which you are still required to do on a revolving monthly basis) the deposit is used by the issuer to clear any outstanding balance. An unsecured credit card is a credit card that requires no deposit. but you must payback what you owe to the credit issuer or risk paying steep interest, late fees and penalties each month, while also turfing your credit worthiness. 

What Is a Typical Credit Limit

Depending on your card, limits can vary. Typically, the minimum limit for a security credit card will be $50 and can go as high as $10,000. With secured credit cards, the limit corresponds to your deposit amount.

How to Increase Credit Limits

With secured credit cards, you can typically increase your limit by adding more security funds. However, this process may vary depending on the credit card provider.

Making Payments

With a secured credit card, you want to pay the minimum amount on time in order to keep your account in good standing. That said, it’s always better to pay off your bill in full to avoid paying interest. The security deposit acts as collateral and is used to cover the balance if you default on payments, so you can still end up owing interest, even with security funds in place.

Typical Secured Credit Card Rates

The interest rates on secured credit cards vary. Some secured credit cards, like the Home Trust Secured Visa, offer only 14.90% interest. Other cards, like the Neo Secured Credit Card, offer more typical interest rates of 19.99%.

Secured credit cards are important: they allow people with no credit history or bad credit to begin using credit responsibly and develop a track record of good credit use, without added risk to the provider.

There can be plenty of upsides to have a secured credit card in your wallet.

Establishing or Rebuilding Credit History

A secured credit card can help build (or rebuild) your credit history. Make sure your credit card reports to one or both of the credit bureaus to make sure your payment history is being established.

Lower Risk for Lenders

Secured credit cards allow lenders to provide a product to those with bad credit without taking on additional risk. Often, this means you can get a credit card from a reputable financial institution or bank, even when you have limited options.

Potential Credit Limit Increase

Secured credit cards can often allow you increase your limit just by adding more funds to your deposit.

Transition to Unsecured Credit Cards

Secured credit cards can often be a stepping stone to an unsecured credit card, which offers more rewards and perks. Sometimes, the lender themselves will upgrade your offer based on a favourable payment history.

Money Required Upfront

Secured credit cards require a deposit that also functions as your credit limit. For those who need access to funds quickly, this is not ideal.

Security Deposit

Your security deposit won’t be returned until you close the account or the bank transitions you to an unsecured card. This ties up money that could be used to pay down debt or add to your savings or investments.

Annual fees

Secured credit cards still have annual fees, depending on the card.

Interest rates

Even though secured credit cards require a deposit, they still charge interest on your balance owing.

Minimal rewards or perks

Secured credit cards generally offer minimal perks, like cash back or rewards, compared to unsecured cards.

There are several factors to consider when choosing a secured credit card. 

Security Deposit Requirement

A security deposit is required, which means you have to have funds available upfront to get this type of card.

Annual Fees and Interest Rates

Secured cards come with annual fees, though there are several no and low annual fee options available. Keep in mind, secured credit cards still charge interest. That said, it’s a good option for both your credit history and your bottom line to avoid carrying a balance on these cards, instead paying off your card in full each month.

Reporting to Credit Bureaus

A good secured credit card will report to one or both of the two major credit bureaus, TransUnion and Equifax. Check that they report to them. Otherwise, your efforts may not be tracked or contribute to bettering your credit score.

Additional Card Features and Benefits

Some secured cards offer significant benefits, like cash back, points and travel insurance.

Ability to Switch to Unsecured

Often, once you’ve established a good record of paying off your credit card, you’ll be able to switch to an unsecured credit card within that bank or financial institution. When choosing a secured credit card, factor in which financial institution you’d like to stay with long-term.

When applying for a secured credit card, or any credit card for that matter, there are some steps to take. 

Research and Comparison

Research the credit cards you’re interested in. Narrow your choices down based on credit bureau reporting, annual fees, interest rates and other benefits.

Gather Required Documentation

You’ll need some personal information and documents to apply for a secured credit card, like your Social Insurance Number, for instance, along with your address, government-issue ID and proof of employment.

Submitting the Application

Most secured credit card applications can be done online, but make sure the application is filled out accurately to reflect your financial situation.

Security Deposit and Card Activation

You’ll need to have cash on hand for your security deposit and usually need to make one initial purchase to activate your card.

Eligibility

In order to be eligible for a secured credit card, consider the following:

• Credit score needed for a secured card: Since secured credit cards are designed to help build credit and there is a deposit given, they’re typically available even to those with bad credit or no credit history.
• Income requirements: Secured credit cards do not typically have income requirements, and require only that you provide the deposit and are not in bankruptcy. 
• Other requirements: Like any credit card, you must be a Canadian citizen and be the age of majority in your province or territory. 

Who Offers Secured Credit Cards?

Not many big banks offer secured credit cards in Canada. However, if you speak to your bank directly (like in person or over the phone) they may provide you with a secured option.

Credit Union Secured Credit Cards

Many credit unions also offer secured options. Speak to your local branch directly or check their website for secured credit card options.

Having a secured card can help you build your credit score, but only if you use it correctly.

Paying On Time and in Full

Paying your card on time will help build your credit, but paying your balance in full at the same time is typically the best way to improve it.

Keeping Credit Utilization Low

The more credit you have available that remains unused, the more creditors know you can handle your finances. For a secured credit card, opt to keep your balance low and your credit limit high.

Monitoring Credit Reports Regularly

Keep monitoring your credit reports. Not only will this be motivating, but you can also stay on top of your accounts, which can alert you to cases of fraud and identity theft.

Graduating to an Unsecured Credit Card

Once you’ve graduated to an usecured credit card, you can continue to use it responsibly. Aim to pay off your balance in full every month. No amount of rewards or perks are worth paying additional interest fees.

Related: Best Credit Cards Comparison