To rebuild your credit history with credit cards for bad credit Canada, you should be conversant with the different types of credit cards on offer. There are different types of bad credit credit cards, which are either secured or unsecured. Majority of credit cards for people with bad credit are secured cards. These types of cards vary from unsecured credit cards in that they require that you put up a security deposit to qualify.
Whether you have a low credit score or no credit score at all, you’re more likely to qualify for a secured credit card. These types of cards are guaranteed by a cash deposit, normally one or two times the amount of your credit limit. This security deposit allows you to secure a loan with your lender, who then holds this deposit as long as you have your secured credit card.
After obtaining a secured credit card, you can utilize it just like you would an unsecured card. You can use it for your daily spending, to book travel, or to shop online, among other things. And just like unsecured cards, you should aim to pay off the secured cards balance in full every month.
What to Look for in Secured Credit Cards
There is a wide array of secured credit cards for bad credit Canada to choose from. These cards come with different features, and it’s of essence that you choose the card that has:
- Low Interest Rate
This is the first feature to look for in a credit card, whether it’s a secured or an unsecured credit card. Be sure to choose a card with a lower interest rate. The benefit of a low interest credit card is that even if you won’t manage to pay off the whole balance at once, you’ll still manage to make your minimum monthly payment. This will enable you to avoid any interest penalties, as well as help you preserve your credit score. At Bonsai Finance, we have partnered with credit card issuers who offer low interest rates.
Lower Deposit Requirement
Most credit card issuers require borrowers with bad credit to make a deposit to secure a loan. The amount required varies from one issuer to another. It’s therefore advisable for you to compare different cards to find the one with a lower deposit requirement. This will help you free up more of your cash to go towards some important financial goals such as debt repayment or savings.
Minimum Setup Fees
Unlike unsecured credit cards, secured credit cards usually require a setup fee, which is normally about 3 percent of the balance. This fee is usually nonrefundable and it can be either low or steep depending on your credit limit.
How to Rebuild Credit with Secured Credit Cards for Bad Credit
Starting to rebuild your credit might prove to be an uphill task, but once you build momentum, you will be on your way to a good credit score. The first step to rebuilding your credit score is to get new credit accounts. You might have sworn off credit cards fearing that new cards will get you in more trouble.
Nonetheless, not taking a credit card will make it even more difficult to get out of your present predicament. Therefore, you should apply for new credit cards for bad credit Canada so that you can establish a positive payment history. While at it, refrain from applying for too many cards. Each application you make impacts your credit score, which can make it even harder to get approved for a new account. Taking too many cards can also make it hard for you to manage your payments and balances.
If you’re looking for secured credit cards for bad credit Canada, Bonsai Finance can make your search super easy. Contact us today and we will find you a legitimate lender with the most competitive terms on the market.