Secured Credit Cards in Canada

Secured credit cards in Canada are typically offered to applicants who find it difficult to obtain an unsecured credit card. They may have filed for bankruptcy, had credit problems recently, or have no credit history. Persons who are new to Canada or want to rebuild their credit scores can also apply for this type of credit cards. In general, most cards offered by the Canadian banks are unsecured, meaning that the holder is not required to make a deposit before obtaining the card. Unsecured credit cards in Canada are standard, platinum, or gold – regular and low interest rate, as well as charge cards and retail credit cards.

To apply for a secured credit card, one has to deposit an amount of money with the card provider. Depending on the requested limit, the security deposit can be in the range from several hundred dollars up to several thousand. In addition to the security deposit, the card issuer may charge an application or setup fee. It is wise to inform yourself whether such a fee applies and if you will have it refunded in case the application is turned down.

In most cases, the credit limit is determined as a percentage of the deposit. Normally, banks will set it at 100 percent or even more. If the deposit is $1,000, for example, the credit limit will also be $1,000 or over. When payments are not made on time, the card provider can use the deposit to cover the card balance.

Secured credit cards typically come with lower interest as they carry less risk for the card issuer. On the downside, some card providers take advantage of the situation customers are in, requiring that they buy costly insurance policies together with the card.

The big banks in Canada, such as CIBC, BMO, Scotiabank, and RBC offer secured credit cards. The secured RBC Royal Bank card serves the same purpose as the regular credit cards do. Depending on the chosen type of card, clients of the Royal Bank can earn bonus points to be redeemed for merchandise or they can include co-applicants who also obtain a credit card for the account. The cardholders decide how much credit they will need, and the money should be deposited as security. If the security is in the amount of $500, the spending limit is also $500.

TD Canada Trust also offers secured credit cards to customers who try to rebuild their credit history or are immigrants new to Canada. It's best to choose Visa, MasterCard or American Express cards, because they are accepted everywhere in Canada. Like with any form of credit, be careful and don't take on too much credit card debt. In many cases, the money deposited can be held for up to 3 years, depending on the chosen card. Despite this, secured credit cards come with the same convenience and freedom that holders of unsecured cards enjoy. The card can be used to make emergency purchases, hotel reservations, car rentals, and more. Those who choose a reward credit card earn the same types of rewards as other cardholders. Even customers with no credit history qualify provided that the amount deposited is at least equal to the minimum credit limit.

CIBC also offers a secured credit card without requiring employment income and credit history in most cases. Deposits are held in interest-bearing savings investment, and the cardholders' money grows while they are establishing credit history. Moreover, clients are given the opportunity to choose from cards with different annual fees, rewards, and other benefits.