Secured Credit Cards in Canada: How They Work and How to Choose
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A secured credit card is a real credit card backed by a deposit you put down. Approval is easy because the lender holds your money as security, and if the card reports to the bureaus, every on-time payment builds your credit history.
How it works
- You apply and put down a deposit, usually between $50 and a few thousand dollars.
- Your limit roughly equals the deposit.
- You use the card and pay the bill every month, like any credit card.
- The issuer reports your payments to Equifax and/or TransUnion.
- After a period of good use, many issuers return the deposit or move you to an unsecured card.
The deposit isn’t spent on your purchases. You still have to pay your bill. It’s only taken if you stop paying.
What to check before applying
| Check | Why it matters |
|---|---|
| Reports to both bureaus? | A card that reports to only one builds only half your file. One that reports to neither builds nothing. |
| Annual or monthly fee | Fees range from $0 to over $100 a year. |
| Interest rate | Often around 20% or more. Paying in full each month makes this irrelevant. |
| Minimum deposit | Lower is easier to start with. |
| Path to an unsecured card | Does the issuer review your account and return the deposit? After how long? |
Terms change. Confirm the fee, rate and reporting on the issuer's own site before you apply.
Tips to get the most out of it
- Keep the balance low when the statement is generated. On a $300 limit, a $250 balance shows 83% utilization, even if you pay it off a week later.
- Pay in full, automatically. Set up an automatic full-balance payment from your bank.
- Don’t apply for several cards at once. One card used well for 6 to 12 months does more than several new ones.
Secured card or credit-builder subscription?
Credit-builder products, which report a small monthly payment or loan, also work. Compare the total cost over a year. A $0-fee secured card with a deposit you get back is usually cheaper than a monthly subscription. Some people use both, to add a second type of account.