If your credit score is low or non-existent, you probably already know that there is some cause for concern. You have to take action to fix this problem, but how? Using a secured credit card Canada is one of the most reliable ways to accomplish this goal.
What is a Secured Credit Card Canada?
A secured credit card is an alternative credit card arrangement that was devised as a way to allow people to use financial assets that they have (in other words, a sum of money) to show lenders that they can be trusted to pay back their debts. Specifically, these kind of cards require successful applicants to temporarily hand over a predetermined sum of money to their credit provider to serve as makeshift insurance. This sum will then get you access to a card with an equivalent credit limit – you can charge no more to it than the amount that you initially deposited.
In this way, it’s not too much different from a debit card. The main difference is that instead of subtracting money from that deposit amount each time you make a purchase, you will be sent a statement each month that you are expected to pay off. If you don’t, you will be charged the amount of interest that you initially agreed to, just as you would with any other credit card. If you still don’t make your payments on this debt, your deposit amount may be forfeited, meaning that you will not get it back. If, on the other hand, you make your payments on time and pay back your entire balance in full at the point of closing, you will be given all of your money back when you choose to close your account.
What Makes a Secured Credit Card Different?
Credit scores can be improved through any type of borrowing, even loans or standard credit cards. Since these alternatives either provide you with much more access to larger amounts of money or with fun rewards and benefits that most consumers want, they might look like more appealing options on the surface. The draw of using secured credit cards for this purpose, though, is that it is virtually impossible to have trouble with this method.
Other lending products might be hard for some people to access, since they typically require good credit and possibly a higher income on top of that. Secured credit cards are a little different. Because you’ve provided your lender with a backup plan in case you default on anything you owe, they know they can always get their money back if things go awry. This means that they don’t need to put as much trust in you, and therefore don’t need to see as much proof that you are in fact trustworthy.
You can get a secured credit card Canada with just about any income or credit score, as long as you’re willing to stick to a low limit if you don’t have much money to spare. You often don’t need to have any credit history at all, which makes them an excellent choice for teenagers and young adults who are just breaking into the credit market here in Canada. Even if you just work part-time, you probably still won’t be turned away. These cards also tend to be much more open about the types of income they will accept, opening them up to potential use by retirees, disabled people, the self-employed, and all others who receive their income by means other than a typical paycheck. There is virtually no instance in which you will be turned away from a secured credit card if you can meet the deposit requirements, so it’s a path to better credit that is virtually guaranteed to work regardless of who you are or what you’ve done in the past.
Are There Downsides To This?
The secured credit card has a lot of advantages, but there is one glaring flaw in it that troubles many people: it requires collateral. There is no getting around the fact that to get one, you’ll have to put up money in advance first. You may be worried that those funds will end up with the wrong person or that you won’t get them back. You may also be loath to let that money sit in someone else’s possession for an extended period of time when it could be driving investments or at least generating interest for you. Deposit amounts are seldom less than a few hundred dollars, and you’ll be losing total control of that amount for as long as you want to use the card. It’s only natural for that to sound a little scary to most people.
However, in virtually all cases, there isn’t actually any reason to be afraid. Secured credit card lending is a very common and well-established process that is entirely legal and legitimate. You’ll lose control of your money for a little while, but you can rest assured that if you live up to your end of the bargain, you’ll get it all back, no questions asked. Your main issue will be getting yourself comfortable enough with this arrangement to see it through to the end, and as long as you can manage that, you’ll be set.
Get Your Secured Credit Card Canada Through Us
Even though secured credit card Canada is an excellent choice, it can be somewhat troubling to pick one out. Because using this kind of card requires you to hand over some of your hard-earned money in advance, it’s important that you feel you can trust your secured credit card provider. Our Bonsai Finance network of trusted partner lenders includes only reputable institutions with whom we have worked extensively in the past, so you know that each and every one of them is worthy of your consideration.