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Though some types of insurance are mandatory, such as car and home insurance, there are other types that might slip your radar.
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Credit cards are one of the most frequently used financial products in Canada. You might be wondering, what sets a secured credit card apart from a regular credit card? The main difference is that a cash deposit is required to secure the credit card, as the name implies. Furthermore, secured credit cards have various uses that a regular credit card would not be suitable for. To explore further what a secured credit card is, its pros and cons, the various uses and the top secured credit cards in Canada, continue reading below.
A secured credit card requires a cash deposit to use. Secured credit cards are also referred to as guaranteed credit cards.
Typically, the cash deposit becomes the credit card’s limit. Although it depends on the credit card provider, some will require a higher cash deposit for a lower credit limit. Secured credit cards are designed for higher-risk borrowers which is why a deposit is required. In the event that the credit card user defaults, the credit card issuer will keep the deposit to repay the owed balance.
Other than the fact that security is required, a secured credit card is the exact same as a regular credit card. You will be able to make purchases in-store, online, through payment processing services, and use it to pay bills.
Do you know the difference between a secured credit card and a prepaid credit card? Find out here.
All financial products have corresponding pros and cons. Before getting a secured credit card, it’s important to understand all of the advantages and disadvantages so you know what you’re getting yourself into. Below is a list of all the advantages and disadvantages of secured credit cards.
Check out these 8 secured credit card myths, click here.
If you’ve never heard of a secured credit card, you might be wondering what instances where using one would be favourable. Secured credit cards actually have many uses and purposes compared to what you might initially think. A list of common secured credit card uses follows below.
The major key difference between a prepaid credit card and a secured credit card is where the money comes from.
It may come up as a surprise, but you can get denied for a secured credit card. Despite, providing a deposit to your lender for security, certain factors can cause your lender to deny your application for a secured credit card. Bankruptcies, multiple missed payments, accounts in collections, etc. can cause your application to be denied by some lenders. If you are unsure as to why your lender has rejected you, you have the legal right to ask for an explanation. It is important to ask, as it can provide you with direction on what you should be trying to improve.
Getting a credit card when you have really bad credit can be extremely difficult. That’s where a secured credit card comes in. It is a powerful tool that is designed to help borrowers with poor credit to rebuild their credit. Every payment you make is reported to the credit bureaus, which in time helps you build your credit enough to get an unsecured credit card. It can take as little as a year before you can reap the benefits of an unsecured credit card such as the low-interest rate, lower fees, and reward points.
You’ve made it this far along which must mean you’re interested in getting a Canadian secured credit card. Not all secured credit cards were made equal, below are the top five secured credit cards in Canada along with what you can expect when applying and using the card.
Learn how to increase your credit score without increasing your debt, click here.
Refresh delivers with a low annual fee and a lower than industry standard interest rate with their Refresh Financial Secured Visa. The lender also guarantees approval because they do not perform credit checks, only the minimum deposit is required. This can bring individuals with poor credit or no credit peace of mind when applying. If you would like to contribute more than the $200 minimum you can do so up to $10,000. Lastly, Refresh Financial offers free online financial education courses to their card users with the goal of improving their customer’s financial literacy.
If you are prepared to pay your balance in full every month, this is an ideal card for you. There is no annual fee if you agree to a higher interest rate. Although, the interest rate will not impact you so long as you make payments on time and in full. If you don’t intend to make full, timely payments every month, you’re a revolving credit card user, then the annual fee with lower interest is the best option with this card. Finally, the maximum credit limit is $10,000 and a second user can be added to the account.
The Vancity secured credit card is a great option for residents of British Columbia who have struggled with financial issues in the past but are now back on track and ready to rebuild their credit. This secured credit card works slightly different than other secured cards. To start you will need to open a Vancity TFSA or high-interest savings account and invest at least $500. Your investment will act as your security and you’ll be issued a credit card with a limit equal to your investment. Another benefit is that you’ll be able to earn interest on the security amount because it’s been invested.
The TD secured credit card requires a deposit upfront which then becomes the credit limit. There is an annual fee and high interest, but there are other unique benefits to using this card. So long as you manage the card successfully by making payments on time and in full for seven continuous months, you will become eligible for an unsecured credit card with TD. This card will definitely help you along the path to improved credit and personal finances.
The Capital One Guaranteed credit card has one of the lowest minimum deposits on the market making it easier to commit to. However, the low minimum deposit is offset by the annual fee and high-interest rate. The annual fee is unavoidable, unfortunately, but as long as you always pay off your full balance every month, you can dodge any interest charges.
Need help choosing the right credit card for your needs? Check out this article.
Capital One | Refresh Financial | TD | Home Trust | Vancity Enviro | |
Annual Fee | $59 | $12.95 | $29 | $0 – $59 | $0 – $395 |
Interest Rates | 19.8% | 17.99% | 19.9% | 19.99% -14.9% | 11.25% – 19.5% |
Minimum Deposit | $75 | $200 | $500 | $500 | $500 |
Regardless of your financial situation, secured credit cards can help you build or rebuild credit and are a great introduction to credit in general. Of course, there are annual fees and interest rates to consider along with establishing and improving financial habits. Secured credit cards are simply an excellent tool to secure a better financial future.
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