Best Secured Credit Cards in Canada

The best secured credit cards in Canada are generally those with low fees, a manageable security deposit and regular reporting to the credit bureaus.

Secured cards can be useful if you have bad credit, limited credit history or are new to Canada. Unlike a prepaid card, a secured credit card provides an actual credit limit that you repay.

KOHO Credit Builder

KOHO Credit Builder is designed to help Canadians establish or build their credit history through consistent monthly payments, without relying on a traditional credit card.

With KOHO Credit Builder, you can:

• +74 points average credit score increase seen using our credit building tools*

• Get approved without a hard credit check or minimum deposit

• Pay no interest on the line of credit

• Track your credit score and credit report directly in the KOHO app

• Build your credit history with monthly payments reported to the credit bureaus

What Is a Secured Credit Card?

A secured credit card requires you to provide a security deposit before receiving the card.

For example, you might provide a $500 deposit and receive a credit limit of around $500.

You then use the card like a traditional credit card. You make purchases, receive a statement and repay what you borrowed.

The deposit normally stays with the issuer while the account is open. If you fail to repay your balance, the issuer may use the deposit to cover what you owe.

Who Should Consider a Secured Credit Card?

A secured card can make sense if you:

• Have bad credit

• Have no credit history

• Are rebuilding after past credit problems

• Are new to Canada

• Have difficulty qualifying for an unsecured credit card

The main purpose is usually to establish a positive payment history.

What Should You Look for in a Secured Credit Card?

Not all secured cards are equal.

Focus on these factors:

Credit bureau reporting

Make sure the issuer reports your account activity to the credit bureaus.

If your goal is building credit, this is one of the most important features.

Security deposit

Check how much money you need to provide upfront.

Security deposits can range from a few hundred to several thousand dollars. Your credit limit is commonly equal to or higher than your deposit.

Annual fees

Some secured cards charge annual or setup fees.

A high fee can make the card expensive to keep long term.

Interest rate

You can avoid purchase interest by paying your statement balance in full by the due date.

If you expect to carry a balance, compare interest rates carefully.

Refundable deposit

Understand when and how your security deposit is returned.

You generally need to repay the entire outstanding balance before closing the account and receiving your deposit back.

Do Secured Credit Cards Build Credit?

They can.

A secured credit card can help build credit when the issuer reports your account activity to the credit bureaus.

Making payments on time can contribute positive information to your credit history.

Missing payments can have the opposite effect.

You do not need to carry a balance or pay interest to build credit. Paying your statement balance on time is generally the better approach.

Secured vs. Unsecured Credit Cards

A secured card requires collateral in the form of a security deposit.

An unsecured credit card does not.

Because the issuer has your deposit as collateral, a secured card can be easier to qualify for when your credit history is weak or limited.

Both still involve borrowing money.

You need to repay purchases you make with either type of card.

Secured Credit Card vs. Prepaid Card

A secured credit card and prepaid card are different.

With a secured credit card:

• You provide a security deposit

• You receive a credit limit

• You borrow money when making purchases

• Payment activity may be reported to credit bureaus

With a prepaid card:

• You load your own money

• You spend from your available balance

• There is no traditional credit balance to repay

• Regular purchases generally do not build credit

If your primary goal is improving your credit history, make sure the product you choose actually reports your payments.

Is a Secured Credit Card Worth It?

A secured credit card can be worthwhile if you have trouble qualifying for a traditional card and want to establish or rebuild credit.

The best option should have reasonable fees, a deposit you can comfortably afford and reporting to the credit bureaus.

You should not need to carry debt to improve your credit. Use the card for purchases you can afford and pay your balance on time.

If you would rather build credit without putting down a traditional secured-card deposit, credit-building products are another option to consider.