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Secured Credit Card Canada Guide
6 Apr 2019

A Beginner’s Guide To Using a Secured Credit Card Canada

Everything has to start somewhere, and that goes double for your credit history. Whether you’re a newcomer in Canada or just too young to have held any credit yet, the sooner you start to build up some credit, the better. A secured credit card Canada is a great choice for a first credit card to help you do that. Like any first, though, you may not be certain about many aspects concerning it, including how you might get one and what you should do with it when you have it. This quick guide can answer all of your questions and then some, so keep reading to learn all you need to know.

How To Get One

Getting a secured credit card Canada is as easy as can be. There are many providers out there who offer these kinds of cards. Once you’ve chosen one, you can contact them and apply for a card, after which point you may or may not need to wait for ID, income and employment verification to take place; it’s actually very uncommon to have to go through these checks. Either way, you’ll find out if you’ve been approved quite quickly. Then, you just send in your deposit amount (usually by mail) and wait for your provider to tell you they’ve received it. They’ll send you your card straight away at that point.

This type of credit card is a great option for beginners because you rarely need a credit history to be approved for one. All the lender cares about in these cases is that you can put up at least as much money as the minimum deposit amount requires. If you can do that, few lenders should turn you down. However, that should not be taken as an endorsement of just picking the first card you see. Each secured credit card is slightly different in terms of interest rates, annual fees, repayment methods, the level of customer service you can access and more, so you should still give your choice of provider some thought.

How To Use One

Once you have your secured credit card, you can use it pretty much just like any other credit card you might have. Since your purpose is to build credit specifically, though, there are a few extra guidelines you might consider following. The most important thing to remember is that you absolutely must make your payments on time and pay the entire balance each month if you can. You should also try to keep your credit use under 30% of your total limit and avoid applying for other cards until you have had the secured one for a good long while. Don’t forget to watch over your credit improvement with the help of one of the many free credit monitoring sites out there now; you want to confirm that what you are doing is having positive effects.

Increasing Your Limit

Most credit cards have variable credit limits that are unique to each individual cardholder depending on their complete credit profile, and that limit can be increased if their profile shows signs of an upswing over their time using the card. Secured cards, though, assign your limit based on the amount you give them as a deposit. You will always get exactly as much credit as you are able to provide collateral for.

Therefore, if you want to increase your limit, you need to send your provider more money to build up adequate deposit coverage. They will usually be happy to arrange this if you contact them and ask, then provide the funds. They will, of course, retain control over all of those funds for the entire length of time that you hold the card, so don’t take this option unless you feel confident that you can give up the cash access for a while.

Lowering Your Interest Rate

When it comes to interest rates on secured credit cards, there isn’t a whole lot to say. What you see is what you get, and virtually all secured credit card Canada providers will be very open about this fact. You’ll always pay that rate if you stick with that card, and your only option to alter it at all is to change cards entirely.

If you’re having trouble making your payments due to interest costs, however, there is one other way to reduce this burden – don’t spend as much on your card. If you slow down and spend only minimally with your card, you’ll avoid high interest fees (remember, they are only a percentage of what you charge to your card, so if your balance stays low, so do they) while still building credit for the future. This advice only helps you if you don’t already have a large balance accruing interest, but if that’s the case, it’s best to stop spending entirely until you can catch up to your current debt obligations and pay them down. This may not be the easiest thing in the world, but since secured credit cards do not generally come with a rewards system, you won’t miss out on any potential bonuses by doing so, and you should be able to cover your normal expenses without resorting to credit to do so. If you cannot, it may be prudent to re-examine and reorganize your finances so you can consistently make ends meet.

Keep the Consequences In Mind

There are always consequences to credit card misuse, and secured credit cards are no different. If you fail to make the appropriate payments on your secured credit card Canada, you can’t just go into bankruptcy to have the debt discharged. Instead, the money that you deposited to get the card in the first place will be forfeited to the provider, since that is the scenario that it was always meant to insure against in the first place. This means that any spending you do with a card like this will be paid for by you in one form or another, without exception. You should never charge anything to a credit card (or buy anything with any other form of loan) while expecting otherwise, of course, but in this case getting off without paying up isn’t even a hypothetical possibility. Therefore, you need to be extremely cautious when using them if you want to get your money back at the end of all of this. Don’t overspend and do whatever you need to do to pay your debt down. If you slip up once, try to learn from that mistake in the future. Building consistent good credit habits now will be key to avoiding negative results both now and in the future.

Moving On

As we discussed previously, the primary purpose of a secured credit card Canada in most cases is that the holder wants to start building credit. If you are successful in this attempt, it might be time to start looking at transitioning over to other sources of credit now that you can qualify for them. These cards are known to be an excellent tool for improving your credit, so you could start seeing significant results within as little as a few months in some cases. Once you have even a little established credit, you can start to look at other credit card options that may be of more benefit to you. If you successfully make the switch, you will not only get access to either rewards or a low interest rate, but you will also be able to get your initial deposit back from your secured credit card Canada provider. This will allow you to take that money back and either spend or invest it as you see fit, returning some financial control back to you.

Some of the options that might be available to you with even just a fair credit score include many of the no-fee options from the big banks, as well as some of the mid-tier versions that do charge an annual fee. Choose carefully and don’t apply to too many at once, or you risk harming that hard-earned credit score you’re depending on. Try to go one at a time, and if you’re turned down by one, wait a little while before you move on to the next one. Eventually you’ll succeed and be able to access the more desirable credit cards everyone prefers. Once you have, you can contact your provider to get your account closed and you’ll get back the entire deposit you put down to begin with.

Get Your Secured Credit Card Canada Now

Knowing about how to use a secured credit card appropriately is only half the battle – in order to put that knowledge into action, you still need to figure out which one suits you most and get your hands on that one. There’s no need to worry about this when Bonsai Finance is on your side. You can examine all of your many options for a secured credit card Canada through our online portal, allowing you to compare different aspects of each one and make an informed choice about which one will work best for you. Once you’ve chosen one, applying will only take minutes more. Take control of your credit for the first time and give our website a look; once you do, you’ll be wondering why it took you this long.