How to Choose a Secured Credit Card
Nov 14, 2023Choosing a secured card that reports to Canadian credit bureaus is crucial to getting the most value out of these credit-building products.
Secured credit cards are a tool that can help you establish, build or improve credit history, but they are not all created equally.
If you’re looking for a secured credit card, keep in mind its main purpose is to help you build credit. Knowing this can help you compare and prioritize a card’s key features, such as credit bureau reporting, low fees and an affordable security deposit.
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1. Seek cards that report to credit bureaus
Whether your goal is to establish and build a credit history or strengthen your credit score, be sure that any secured credit card under consideration will report your payments to at least one of Canada’s main credit bureaus — Equifax and TransUnion. If your payments aren’t reported, the card won’t have any impact on your credit.
It’s not always possible to verify whether a card issuer reports payments to a credit bureau just by checking its website. If you’re uncertain, ask the provider before applying for a secured card.
2. Find a minimum deposit you can afford
Secured credit cards require a security deposit to open an account, which is typically equal to your credit limit. The minimum required security deposit is another important factor to consider when deciding which secured card is best for you.
In many cases, you can’t get approved for the card until you transfer the full amount of your security deposit to the issuer, which can be hundreds of dollars in some cases. If your cash flow is limited, a card with a lower deposit requirement might be best for your budget.
3. Compare fees
Generally, it’s a good idea to avoid annual fees and other fees on credit cards, if possible. Some credit card providers are clear about their fees, but other may require you to sift through the fine print. Be on the lookout for:
Inactivity fees.
Higher-than-normal foreign transaction fees.
Monthly fees on top of an annual fee.
If you have bad credit and find it tough to get approved for a secured card, it may be worth paying an annual fee in exchange for a more flexible approval process. Alternatively, you can also seek out a prepaid card that has the ability to help you build credit while avoiding debt. They’re rare, but they do exist.
The best secured credit cards in Canada.
Compare the best secured cards side-by-side so you can choose the one that's right for you.
4. Look for issuers that offer both secured and unsecured cards
Some providers that offer a variety of credit cards may automatically offer to upgrade cardholders to unsecured cards — otherwise known as traditional credit cards — after a certain period of responsible usage. That includes on-time and regular payments, which can improve your credit score.
The best way to ensure a chance of getting upgraded is to choose a credit card company that has both secured and unsecured credit cards. That may make the process of being upgraded from a secured to an unsecured card with the same issuer can be fairly seamless when the time comes.
If you opt for a provider that specializes only in unsecured cards , you’ll have to switch card issuers when you’re ready to upgrade. However, switching providers is manageable, and shopping around can help you find the best card for your needs.
Which makes sense for you? Secured vs. Unsecured Credit Cards: How to Choose
5. Be aware of approval timelines
Secured cards generally don’t offer instant approval because you need to provide a security deposit to be officially approved for a card. That said, some card providers all but guarantee approval as long as you meet the basic requirements (like being the age of majority and a resident of Canada) and provide a deposit.
6. Compare perks, rewards and other benefits
It’s nice to get cash back or rewards when using a credit card, but the primary purpose of a secured card is to build credit, so rewards and benefits should be of secondary concern. Still, some secured credit card providers offer cash back rewards or other perks that can enhance the experience of being a cardholder.
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Shannon Terrell
