Secured Credit Cards: Everything You Need To Know

A Guide to Secured Credit Cards in Canada

Did you know that the average Canadian household is over $20,000 in debt?

And that’s not even including mortgage debt.

Furthermore, they’re also spending 7.3% interest on average across their various debts.

How did they get to this point?

Is it because they lead extravagant lifestyles and don’t have the income to support them?

Of course not.

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Is it because they don’t know how to budget or save?

Not necessarily.

Although as debts pile up, the stranglehold they can put on a household’s cash flow makes saving much more difficult.

As many Canadians know, debt can become a slippery slope.

Especially when we reach out to the easiest source of credit in times of crisis.

When we use Payday Loans or Cash Advances on our credit cards, they can come with a disproportionate rate of interest which means that while we’re paying out more every month, our payments do little to reduce the principal debt outstanding.

The result?

Our debts stay with us for longer and get harder to pay off.

Likewise, those who have recently been made Bankrupt or completed a Debt Management Plan or Consumer Proposal may assume that bad credit is the only credit available to them.

Fortunately, there is a better way!

Secured Credit Cards can offer you a line of credit when you need it most, at a far more reasonable rate.

If you have a less than stellar credit rating (for example) as a result of Bankruptcy, you may have assumed that high-interest lines of credit were all that were available to you.

However, many Secured Credit Cards have rates of just under 20%, and won’t hike up their feed drastically if you need a cash advance.

Want to know more?

Let’s dive a little deeper…

How do Secured Credit Cards work?

Secured Credit Cards can be a lifeline for those who need access to good credit, but whose credit ratings may preclude them from products with reasonable interest rates.

For those who have been made Bankrupt or have recently completed Consumer Proposals, a Secured Credit Card can be an excellent way of rebuilding their credit while also improving their household finances by encouraging saving.

In order to be eligible, all you need to do is provide a security deposit in the form of a cheque.

Your credit limit is then set at an amount that’s commensurate to your security deposit.

The minimum amount that an applicant can put down is $1,000, although they can put down as much as $10,000.

The security deposit mitigates the lender’s risk, thus enabling them to offer users advantageous rates of interest which are often reserved for the best credit cards.

What makes these cards appealing is that the security deposit earns interest for as long as you keep using the card and keeping your account in good standing.

And at rates of around 2% they’re a much more effective savings tool than many high street savings accounts on the market today.

As such, your line of credit also becomes your means of saving.

You will also be expected to pay into the card regularly above and beyond what you surrender in the security deposit.

However, this condition may be advantageous if your household typically struggles to save.

Of course, nobody knows what the future will bring, and when you may need to regain access to your deposit.

The good news is you can cancel your card at any time.

All you need to do is pay off any outstanding balance, and you get your deposit back along with any interest earned.

Your deposit will be insured by the Canada Deposit Insurance Corporation (CDIC).

As long as you have a deposit, virtually everyone is approved, regardless of their credit rating.

Furthermore, the application process itself is very simple.

In the unlikely event that you are not approved, you’ll get your security deposit back straight away.

Although not every debt-stricken family will be able to free up the necessary capital for a deposit, those that can should certainly consider a Secured Credit Card.

As both an equitable line of credit and an excellent saving tool, it may be highly advantageous in helping families to escape the cycle of debt which is so easily perpetuated by opportunistic, high-interest products like Payday Loans.

Frequently Asked Questions about Secured Credit Cards

This may be your first exposure to the concept of a Secured Credit Card, so it’s likely that you have some questions.

In this FAQ section, we’ll attempt to answer some of your questions about these cards and how they can affect those who are either recovering from Bankruptcy or looking for a line of credit that won’t perpetuate the cycle of debt…

Can a Secured Credit Card improve my credit?


Providers report your file to the credit bureau on a monthly basis, and your file is updated accordingly.

If you have applied with a co-applicant (like a spouse) you’ll find that both parties’ credit ratings improve.

What are the minimum/maximum credit limit?

Results may vary by card but expect a minimum credit limit of $1,000 and a maximum of $10,000, commensurate with your deposit.

Who qualifies for a Secured Credit Card?

Around 95% of applicants qualify for Secured Credit Cards regardless of credit rating or history.

As long as you have a source of income, there’s a good chance that you’ll qualify.

You will qualify even if you have recently been made bankrupt, although those who are currently in Bankruptcy will not qualify.

Will I be adversely affected if my application is declined?

Security deposit cheques are not cashed until the provider has approved your application.

So you don’t need to worry about delays getting your deposit back to you.

What if I don’t have a chequing account?

In this digital age, some applicants will not have a chequing account.

However, companies that offer Secured Credit Cards will usually accept cheques from a third party or the transfer of funds through Western Union.

How long do I have to wait for the card to arrive?

In most cases, the turnaround is approximately 2-3 weeks after the application is complete and the security deposit has been received.

Deposits sent via guaranteed funds like certified cheques, Western Union payments, bank drafts or money orders may take up to a week less to process.

You can ensure the process is as smooth as possible by sending the right supporting documents with your application.

For example, if you have moved recently,you may need to send a copy of your driver’s license or a bill with your current address.

If you were recently discharged from Bankruptcy, you should attach your certificate of discharge.

While you may request a “rush delivery” of your new card for a fee, this will not expedite the actual application process.

Can any Canadian resident apply?

Secured Credit Cards tend to be available to Canadian residents, although residents of Quebec may not qualify.

Can I increase my credit limit?

You may be able to increase your card’s credit limit by adding additional funds to your deposit and requesting a credit line increase.

Making an overpayment will not be enough to increase your credit limit with a Secured Credit Card.

Are there any fees?

Some cards will have a reasonably small one-time set-up fee of around $40 which will be charged to the first statement.

There is also usually a monthly fee (less than $10).

Secondary cards may carry additional fees.

Do I have to pay off the full balance every month?

No, you only have to make (at least) the minimum payment on your statement.

Your security deposit cannot be used to pay off your balance.

If you are able to pay off your balance in full each month, this is the fastest way to rebuild your credit.

How do I make payments?

Payments can be made at any Canadian financial institution, either in-branch over the phone or digitally.

Some may prefer to mail cheques or money orders directly to the provider.

Will I qualify if I have an outstanding judgment against me?

You may still qualify for a Secured Credit Card, even if you have an outstanding judgement against you.

You will, however, be required to submit third party funds and provide written documentation confirming that the funds submitted are not your own.

Is there a minimum age to apply?

There is no special age limit for a Secured Credit Card.

In this respect, they are like any other credit card and subject to the same age of majority in your province of residence.

In Ontario, Manitoba, Alberta, Saskatchewan, and Prince Edward Island 18 is the minimum age at which you may apply.

However, in New Brunswick, British Columbia, Nova Scotia and Newfoundland/Labrador the minimum age is 19.

How much can I spend on a Secured Credit Card?

As long as you remain within the credit limit which is commensurate to your deposit, you can spend as much as you like, and use the card however you see fit.

The beauty of a Secured Credit Card is that it allows you to save as you spend, so you can allow your credit limit to rise as you add to your deposit.

While you should think twice before upping your credit limit, you have the benefit of knowing that you have access to your deposit whenever you need it, just as long as you pay off your outstanding balance in full.

You can use your card to make purchases in-store or online and even get cash advances at ATMs and banks at a rate that’s not dissimilar to the normal interest rate for purchases.

Think of your Secured Credit Card as a revolving line of credit.

Debts getting out of control? We can help!

Whether you’ve been made Bankrupt recently or you’re struggling to cope with your existing household debts, we can help you to find the best debt relief solutions for your needs.

If you’re ready to live your life free of debt, give us a call today on (877)879-4770.

It will be our pleasure to arrange a risk-free, zero-obligation and 100% confidential callback.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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