Get a free, no obligation personal loan quote with rates as low as 6.99%
Get Started You can apply with no effect to your credit score

Credit cards are a popular staple in many consumers’ wallets. They make it easy and convenient to make purchases without having to walk around with wads of cash and many even allow cardholders to collect points and rewards for every dollar spent. Unfortunately, not everyone can qualify for a credit card. That’s when they may consider getting a secured credit card or a prepaid credit card. While both have their advantages, how do you choose between a secured credit card vs a prepaid credit card?

Secured Credit Cards

Secured credit cards are very similar to traditional credit cards in that you’ll be given a specific credit limit that you are not allowed to go over. You can spend as much as you want every month, as long as the credit limit isn’t exceeded. You’ll be expected to pay your balance by a specific due date at the end of every billing cycle. 

So, what’s the difference, you ask? The biggest difference between the two is the fact that secured credit cards require collateral to secure the card. Unlike traditional cards whereby no collateral is required – and hence are known as “unsecured” credit cards – secured cards require a deposit to be put down before they can be used. Essentially, this deposit serves as the credit limit on the card.

With regular credit cards, issuers depend on your credit history and promise to repay the balance in full at some point in the near future. These cards are typically offered to consumers who make a decent income and have a healthy credit score with no history of defaulting on loans or payments. In contrast, secured credit cards provide the issuer with the ability to recoup any potential losses if you’re unable or unwilling to pay down your balance in full.

Secured Credit Card Pros And Cons

There are several reasons why you may want to apply for a secured credit card. But there are also a handful of drawbacks to consider as well:


  • Higher chances of approval. One of the biggest benefits of a secured credit card is that it’s much easier to get approved versus a traditional unsecured card. That means you don’t necessarily need a very high income or credit score to get approved. In fact, you can get approved even with poor credit. Moreover, you can get approval within a few minutes of applying.
  • Build credit. A secured credit card is an ideal financial tool to use to build a credit profile from the ground up. Since a lack of credit history makes it nearly impossible to get an unsecured card, you can opt for a secured card instead, and every timely payment you make will go towards building a healthy credit score
  • Cash back perks (with some cards). There are a few secured credit cards that come with a rewards system, which means you can earn points with every dollar you spend using your card. You can then redeem these points for purchases, including at retailers, gas stations, grocery stores, and for travel.


  • Not as many perks as unsecured cards. While you may be able to find a secured credit card that allows you to earn cash back rewards, that’s pretty much where the perks end. Regular unsecured credit cards offer plenty more benefits, including a variety of travel plans and VIP experiences, among others. 
  • Requires a security deposit. A secured credit card requires that you make an upfront deposit into your account before you can start using it. That means you’ll need to have access to these funds from the get-go rather than spending money you don’t have, which is the case with an unsecured card. Essentially, you can only spend money you already have. And while this may be a drawback, it can also be considered a benefit because it will prevent you from getting into credit card debt. 
  • Credit limit is equal to the security deposit. If you have limited funds, your credit limit on your secured card will be equally restricted. That’s because the security deposit required is typically equivalent to the credit limit that you cannot exceed.
  • Fees. Many secured credit cards charge an annual fee. However, these types of fees also come with unsecured cards. 

Best Secured Credit Cards in Canada

 Annual FeePurchase RateMin. Deposit
Neo Card Secured Credit$0– 19.99% – 29.99%
– QC: 19.99% – 24.99%
Home Trust Secured Visa Card0$ or $59– 19.99% (no annual fee)
– 14.9% (with annual fee)
Capital One Guaranteed Secured Mastercard$5919.8%$75

Neo Secured Credit

Neo Secured Credit has a minimum credit limit of $50, while the maximum is dependent on how much you can afford to put down as a security deposit. This credit card is a great option to build credit as you’re guaranteed approval so long as you can provide the minimum deposit of $50. 

You can then use the card like a regular credit card and make purchases. On average, you can earn 5% in cash back with Neo partners. As a welcome bonus, you can earn up to 15% cash back on your first purchase with Neo partners. The Neo Secured Credit card has no monthly fees and is great for building credit and tracking spending through its Insights dashboard. 

Home Trust Secured Visa Card

Whether you have bad credit or no credit because you’re new to Canada, you can still qualify for the Home Trust Secured Visa card. With this secured Visa, you can build your credit score and control your spending by limiting your credit limit. Your credit limit is based on your security deposit, which can be anywhere from $500 to $10,000.

While the minimum security deposit is on the higher side, they do have certain benefits such as:

  • Lower interest rates – While there is no annual fee for the card, if you opt for an annual fee of $59, you can lower your rate from 19.99% to 14.90%.
  • Zero Liability policy – If any fraudulent activity occurs in your account, you won’t be held liable for the charges.

Capital One Guaranteed Secured Mastercard

The Capital One Guaranteed Secured Mastercard has an annual fee of $59 and an interest rate of $19.8%. While its fee is high, it has a low minimum deposit requirement of $75. Moreover, like the Home Trust Secured Visa card, you’ll have Zero Liability protection. 

It also has insurance protection like many unsecured credit cards. The Capital One Guaranteed Secured Mastercard offers:

Prepaid Credit Cards

A prepaid credit card might sound a little like a secured credit card because it involves loading it with a certain amount of funds. This amount, in turn, cannot be exceeded. You’re only able to spend up to the specific amount added to the card.

Every purchase you make will be deducted from the amount you’ve loaded onto the card. Once you’ve spent the entire amount and the balance is at zero, there’s nothing left on the card to spend.

Where prepaid credit cards differ from secured credit cards, however, is the fact that the former involves no interest payments on outstanding balances or monthly bills to pay. That’s because you’re not borrowing any money from a credit card issuer, so there’s no interest to be paid to anyone. Many people may think that a prepaid credit card is a credit card, but it isn’t, mainly because of the reason we’ll discuss next.

Prepaid Credit Card Pros And Cons

Prepaid credit cards have several attractive qualities, but they also come with a handful of drawbacks. Consider the pros and cons of a prepaid card before applying for one:


  • No credit is required. There’s no approval process for prepaid credit cards. You don’t need a bank account, high income, or credit score to get approved. As such, these cards are great for those with low credit scores or no credit history at all. 
  • No security deposit. Secured credit cards require a security deposit upfront, and the card’s credit limit is generally equal to that security deposit amount, as mentioned. But with a prepaid credit card, no security deposit is necessary. Instead, you load as much or as little money onto the card as you want and can only spend up to that specific amount. 
  • No bank account is required. As mentioned, there’s no approval process for getting a prepaid card, which means no bank account is required.  
  • Helps control spending. Since you’re only spending money you already have rather than using credit, you can control your spending and avoid credit card debt.


  • Fees. Many prepaid cards come with activation fees, monthly fees, transaction fees, or fees associated with loading funds onto the card. Make sure you carefully review the contract to identify all fees.
  • Can’t build credit. Prepaid cards don’t affect your credit profile. Since you’re spending money that is already on the card and you’re not borrowing anything, there won’t be any payments reported to the credit bureaus. As such, you can’t use a prepaid card to build credit.

Best Prepaid Credit Cards

Annual fee
Neo Money™ card$0Learn More
KOHO Prepaid Mastercard  – KOHO Essential: $48 ($4/month)
– KOHO Extra: $84 ($9/month)
– KOHO Everything: $19/month
Learn More
CIBC Air Canada AC Conversion Visa Prepaid Card $0Learn More
Canada Post Visa Prepaid Card$0Learn More

How To Get A Secured Credit Card

Qualifying for a secured credit card is much easier compared to a traditional unsecured card. Generally speaking, all you need to get a secured card is some form of income and a security deposit. 

Having said that, there are instances where your application could be turned down, including the following:

  • You can’t provide the security deposit. The main requirement to qualify for a secured card is the security deposit. If you can’t come up with the minimum funds for the deposit, you won’t qualify.
  • Inability to prove your income. Credit card issuers typically want to see proof of income that backs up the income you say you earn on your application form. If you can’t come up with documentation to support your income claims, you could be turned down.

Secured Credit Card vs Prepaid Credit Card: Which One Should You Get?

Both these cards are easy to get approved for, regardless if you have bad credit. However, your decision to take out a secured credit card vs a prepaid credit card depends on your goals.

When To Choose A Prepaid Card vs A Secured Credit Card

If you’re looking to keep tabs on your spending, a prepaid card may be a good idea. You can use the card as a budgeting tool and set limits on what you can spend. Prepaid cards are also a great alternative to cash and make spending more convenient. You can even use them to spend online. 

When To Choose A Secured Credit Card vs A Prepaid Card

If you want to build good credit, then go for a secured credit card. With these types of cards, your payments will be reported to the credit bureaus, which is what helps to build a healthy credit profile. Plus, with every timely payment you make, you’ll build a positive payment history which can help build your credit scores. With a continuous credit building, your credit score can be strong enough to get you approved for an unsecured credit card, along with other financial products.    

Secured Credit Card Vs. Prepaid Credit Card FAQs

Does a prepaid card hurt your credit?

No, applying for a prepaid credit card will not impact your credit score, either positively or negatively. That’s because your payments are not reported to the credit bureaus. 

Why do I need to provide a security deposit?

With a secured credit card, your upfront deposit is usually equal to your credit limit, which is the maximum amount you can spend. For instance, a $1,000 credit limit would typically require a security deposit of $1,000. This deposit protects the credit card issuer if you can’t pay your balance.

Do prepaid cards have fees?

Prepaid credit cards generally have annual or monthly fees to pay.  Some come with higher fees than others, so it’s always best to scope out the different types of prepaid credit cards out there and compare the fees charged on each.

Do secured credit cards charge interest? 

Secured credit cards typically come with annual and interest fees, just like a regular credit card. If you don’t pay your balance off in full every month, you’ll be charged interest on the balance. In addition, you could also be faced with penalties if you’re late making payments every month.
Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

More From This Author

Special Offers

More From Our Experts
Porting A Mortgage | What Does It Mean?

By Bryan Daly
Published on June 11, 2024

Everything you need to know about porting your mortgage and when it's actually a good idea.
Deed In Lieu Of Foreclosure In Canada: An Alternative To Foreclosure

By Lisa Rennie

A deed in lieu of foreclosure is when you agree to voluntarily hand over the deed to your home to the lender instead of going through a foreclosure.
Pros And Cons Of Buying A House vs Buying A Condo

By Lisa Rennie

What are some of the disadvantages and advantages of buying a house or a condo?
What Is The Moi Program?

By Savanna Craig

Are you wondering if the Moi program is worth it? Find how much Moi points are worth and where you can earn them.
The Costs Of Owning A Home In Ontario

By Lisa Rennie

Wondering how much it costs to own a home? Let's look beyond mortgage closing costs and analyze exactly are the monthly costs of owning a house in Ont...
When Is The Best Time To Buy A House?

By Lisa Rennie

Learn how to determine whether or not it's a good time to purchase a house.
What Is A Power Of Sale For A Mortgage?

By Jessica Martel

A power of sale essentially allows the lender - not the homeowner - to sell the home if the borrower defaults on the mortgage.
Do You Qualify For Disability Assistance In BC?

By Matthew Taylor

The BC Disability Assistance Program provides monthly disability assistance payments to people with the Persons with Disabilities (PWD) Designation.

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Expert Tips
And Advice

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card