A secured credit card (Canada-based options) includes several traditional banks and digital banks. However, the options are more limited when compared to other markets, like in the United States.
In this article, we will discuss secured credit cards in detail. This will include an overview of how they compare to other credit card options. Plus, we will also look at the benefits, where to find them in Canada and answer frequent questions on the topic.
This article is part of our free series on credit cards and banking, including how to get a US credit card for foreign nationals, which you can access by clicking here right now.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Secured Credit Card Canada
- Secured Credit Card vs Unsecured Credit Card
- What Are the Benefits of Secured Credit Cards?
- Where to Get a Canadian-Secured Credit Card?
- Frequently Asked Questions
- Ready to Open Accounts With Banks in the USA?
Secured Credit Card Canada
Secured credit cards from Canada-based banks offer a wide range of benefits, including the ability to start building credit, repairing credit, and managing credit card spending efficiently. However, secured credit cards can also be a way to establish credit in a new country, and a first step towards accessing lucrative credit card rewards programs and even other financing options like mortgages and lines of credit.
If you’re looking into other financing options, it’s important to explore both LTC vs LTV and how they compare to each other. Loan to cost and loan to value are both popular financing terms used by individuals involved in commercial real estate
Secured Credit Card vs Unsecured Credit Card
The main difference between a secured credit card and an unsecured credit card is that secured credit cards require the cardholder to maintain a balance at the issuing bank while unsecured credit cards do not require the cardholder to maintain a deposit.
To help illustrate the difference between secured and unsecured credit cards, here is a look at these two terms specifically.
Secured Card
A secured credit card refers to a credit card that requires a deposit to be kept with the bank at a certain level. In most cases, secured credit cards are used by individuals who need to establish a credit history in a new country, people with limited credit history, or individuals who need to improve their existing credit score.
Unsecured Credit Cards
Unsecured credit cards are those that accumulate debt that the cardholder promises to repay to the card issuer. In other words, the cardholder has made a promise to repay the balance of debt they accumulated. The credit card company has assessed the individual’s credit history and determined that the person is likely to repay any balance they accumulate on the card.
Individuals with outstanding debt looking to reduce the overall interest they pay each month might consider wanting to transfer credit card balances from an existing credit provider to a new credit provider.
What Are the Benefits of Canadian Secured Credit Cards?
The benefits of a Canadian-secured credit card range from building new credit to repairing poor credit. Additionally, holders of these credit cards will find that they are more difficult to misuse because the available credit will not go higher than the balance in the secure account.
Benefits of Canadian Secured Credit Cards
- Building credit without an existing credit history
- Accessible to individuals with poor credit
- Enables cardholders to apply for other cards in the future
- Path to lucrative credit card bonuses
- Builds credit to enable mortgages and lines of credit
- Easily managed credit balance and repayment
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Where to Get a Canadian Secured Credit Card?
Where to get a Canadian-secured credit card will depend on your specific needs. For example, while many Canadian financial institutions can issue secured credit cards, not all do.
So, if you have an existing banking relationship in Canada, the best option is to typically start there and see what options exist for you.
Does a Bank Offer a Secured Credit Card?
Importantly, not all banks offer a secured credit card. It is becoming more difficult to find secured credit cards from large financial institutions. This is especially true if you are a foreign non-resident, however, residents also face challenges in finding suitable secured credit cards for their needs.
Does a Secured Credit Card Help Build Credit?
Yes, a secured credit card does help build credit. A secured credit card is one of the best ways to start building credit if you are a foreigner, or non-resident, have a limited credit history, or need to rebuild your credit after poor credit management.
Am I Required to Make a Security Deposit to Obtain a Secured Credit Card?
Yes, you are required to make a security deposit to obtain a secured credit card. The deposit is what the card issuer will use to “secure” the credit card. This is why it is called secured instead of a standard unsecured credit card.
Frequently Asked Questions
Below are three of the most common questions we receive from people looking into how to get a secured credit card in Canada. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Is an Unsecured Credit Card?
An unsecured credit card is a standard credit card that allows the cardholder to accumulate debt. The reason that a card is considered unsecured is that the card repayment is based on the cardholder’s commitment to repay the card.
Are Credit Cards Secured Debt?
No, credit cards are not secured debt if you get a standard unsecured credit card. Importantly, the majority of credit cards fall into this category of unsecured debt. That said, there are secured credit cards that would qualify as secured debt, this is because the cardholder is required to maintain a deposit at the bank to secure the balance of the card.
Why Should I Get a Secured Credit Card?
Whether you should get a secured credit card will depend on your specific needs and goals. However, there are a number of reasons why you may want to consider a secured card. For example, secured credit cards can offer a fast path to establishing and building credit. This is especially true if you are a non-resident, as secured cards can be easier in terms of approval.
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