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If you’re looking to build credit, a secured credit card is one of the best ways you can accomplish this goal. Not only can you use a secured credit card to establish a positive credit history, but you can avoid having to pay interest if you use it responsibly. However, before you apply for a secured card, it’s important to know exactly how this type of card can help you. From there, you can make a more informed decision as to which card is best for you.
A secured credit card is a type of credit card designed for people with no credit history or a poor credit score.
The card helps you build credit when you use the card responsibly. This means you should aim to pay off your monthly bill on time and keep your balance under 35% of your credit limit.
By practicing these good credit habits, you’ll start building a positive credit history over time and eventually improve your credit score to the point where you can qualify for better credit cards and loans.
The primary difference between secured and other credit cards is that a secured credit card requires a collateral deposit to get approved.
The amount of the deposit can vary by card, but it can be as low as $200. Your deposit is usually one to two times your credit limit.
The credit card issuer keeps the deposit if you default on your payments, and you’ll get it back with interest when you close the account.
The main drawback of a secured credit card is that you have to put up a deposit to get approved. If you can’t manage to part with that much cash for an extended period, it can be tough to get approved.
Also, many secured credit cards charge high interest rates, so you’ll want to make sure to pay your bill in full each month to avoid interest charges.
If you’ve had issues with credit card debt or overspending in the past, it’s even more important that you’re prepared to pay off your balance every month as you certainly don’t want to increase your debt. If you’re concerned about repeating past mistakes, it may not be worth it.
Several lenders in Canada offer secured credit cards to help you build credit. If your bank offers one with decent features and terms, it may be worth applying to keep all of your accounts under one roof.
To make sure you’re getting the best deal, research and review secured credit cards from multiple credit card issuers.
Remember, you’ll likely only keep this card for a short period as you build credit. So, while the terms may not be ideal, you’ll hopefully be able to get approved for an unsecured credit card in the near future.
There’s no easy answer to this question, unfortunately. Your credit score is based on a complex calculation based on several different factors. If you have no credit history, for instance, it can take less time to get an unsecured card than if you have recent negative items on your credit report.
As using your secured credit card can help you build your credit, it’s important to keep an eye on your credit score.
As previously mentioned, it helps to make your payments on time every month and keep your balance low.
Also, it’s a good idea to avoid applying for new credit unless you absolutely need it. Every time you apply for a credit card or loan, the lender makes a hard hit inquiry on your credit report, which can affect your credit score.
Meanwhile, to help you select the best secured credit card, the credit card team at LendingArch has hand-picked the secured credit cards listed below.
As you compare these two cards, make sure you consider the associated fees, interest rates and any other features that are important to you.