Building your credit using secured credit cards

Building your credit using secured credit cards

Written by Caitlin Wood
Last Updated April 21, 2021

Building your credit can be difficult, especially if you’re new to Canada or have previous remarks on your credit report like a bankruptcy. When you have a bad or no credit history, gaining access to different credit products to help you build your credit can be extremely difficult. That’s when a secured credit card can come in handy. 

What is a Secured Credit Card? 

A secured credit card in many ways works just like a standard credit card provided to you by a bank or lender with one major difference: the secured credit card is only provided in return for a monetary deposit used as collateral. For this reason, a secured credit card is available to a much larger subset of the population. A secured credit card can be obtained if the applicant has a bad credit rating and also in the event that the applicant has no credit history at all. A secured credit card works as an effective way to build (or rebuild) your credit for a brighter financial future.

Secured credit cards are best for people with no credit score like students, young people, and immigrants. They are also a great option for those with a poor credit history that need to rebuild their credit score or for anybody that has filed bankruptcy. 

How Do You Build Credit Using a Secured Credit Card? 

A secured credit card helps you build credit like any other credit product. Here are some tips on how to use your secured credit card to build credit: 

  • Establish a payment history – Don’t simply have your secured credit card tucked away, use it sparingly each month to build up your payment history. 
  • Pay on-time – Be sure to make your payments on time. Like a missed payment, late payments can also affect your credit negatively.  Similarly, every on-time or early payment will help improve your credit score.
  • Pay the whole balance – Whenever possible pay off the entire balance rather than the minimum payment. Each full on-time payment will positively affect your credit score.   

Benefits of a Secured Credit Card

While an unsecured credit card is the goal of most individuals, there are still some benefits to a secured credit card. 

  • The main benefit of using a secured credit card is that it can help you establish a stronger credit score
  • A secured credit card can help you qualify for an unsecured credit card as well as other credit products.
  • Whether you’ve had a bad credit score or have declared bankruptcy in the past, you can still qualify for a secured credit card

Drawbacks of a Secured Credit Card

Nonetheless, a secured credit card still charge common fees that you would expect to have on unsecured credit cards. In fact, fees for secured credit cards are often higher. Sometimes lenders require monthly insurance fees, on top of your security deposit. There are good secured credit cards, and bad secured credit cards. The best-secured credit permit you to switch to unsecured credit cards after a specified amount of time. This is the type of situation where it really pays to shop around. Your credit limit is usually determined by your deposit. Usually, your credit line will equal the amount of your deposit.

You will also be charged an APR (annual percentage rate) for balances you carry forward. You will want to ensure that your APR is low if you plan on having forward-carrying balances on your record so that your interest payments are low as well.

Best Secured Credit Cards

 APRCredit Amount LimitFees
Refresh Financial Secured Visa17.99%$200 – $10,000$12.95/annually + $3/month for maintenance. 
Home Trust Secured Visa19.99%$500 – $10,000$0
Capital One Guaranteed Mastercard19.8%$59/annually

How Much do You Have to Deposit?

There’s no definite answer to this question. Often, the required deposit is between $300 and $1000. A lender will usually set minimum and maximum limits for your deposit. Some lenders actually pay interest on your deposit and treat it as a savings account. Your security deposit is used in the case that you default on your payments.

How Do You Apply for a Secured Credit Card?

In order to apply for a secured credit card, you’ll need to provide certain information and documents during the application. 

  • Personal Information: When applying you’ll have to provide basic personal information such as your name, address, phone number, social insurance number and more.
  • Financial Information: Many secured credit card providers often require you to provide pay stubs or bank statements as proof of income. 

Depending on the provider, there may be age restrictions, as well as other company-specific requirements.

Credit Reporting and Secured Credit Cards

The main goal of using a secured credit card is to build your credit score. In order to accomplish this, you need to ensure that your lender reports to the major credit bureaus. Failing to do so will result in you not getting the results you need to move on with your finances. It is important to ensure that your secured credit card helps you work towards your personal financial goals.

Bottom Line

A secured credit card can be advantageous to those with no or poor credit. While it may take a while to build your credit, if you are patient and diligent with paying your secured credit card, you’ll soon be able to access regular credit products. In most cases, it can take a little less than a year for you to transition from a secured credit card to an unsecured credit card.


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Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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