Credit cards are a few of the easiest ways in which Canadians can build their credit history. Secured credit card Canada is probably what you need for this to be more effective.
Secured credit card Canada is the easiest to get since lenders will easily approve. This is because, with collateral attached to the account, lenders have a minimal risk of losing money to borrowers. The general concept behind these cards is enhancing the borrowers’ credit scores.
What is the secured credit card Canada?
These are the credit cards designed to enable individuals with less than perfect credit score build their creditworthiness. For these cards, one is required to have a deposit that is treated as collateral for the card. The deposit eases the risk for the issuer. Some issuers will give you credit that is equal to the deposit. The deposit is usually taken by the issuer in case you are unable to pay up what you spent on the card. However, you are able to get back your deposit whenever you clear your outstanding balance.
Who should take the secured credit cards?
Though the credit cards are very useful, they are not always the best cards for all financial situation. There are some people whose financial situations are best suited to use these cards. These include:
- Those who are focused at spending within a specific budget. These cards have a specific budget beyond which one is not allowed to spend. People who want to restrict their spending may make use of these cards.
- The card is also appropriate for individuals who are just getting into the use of credit cards. This is because using credit cards requires some self-discipline and there is no better way to learn this than having a secured credit card.
- The card is appropriate for individuals looking to improve their credit score. As already seen, secured credit cards have a limitation to how much you can spend and upon reaching the limit you cannot be able to overspend therefore good when looking to improve your score.
- Finally, the card is useful for individuals who want to avoid living in debt.
How to best use the cards
The following are some of the simple rules you should consider in order to make good use of the cards:
- Make timely payments- When using the card to build a credit score, making your payments in good time is a key requirement. A credit score takes some time to build. Late payments with these credit cards can incredibly drop your credit score.
- Avoid carrying balances- Carrying balances is not advisable even with other kinds of credit cards. With these cards, it means you have a lower credit score and therefore more dangerous to carry balances.
- Make full payments- When making payments with the secured credit cards, it is advisable to ensure that you clear your balances in full. It is also important that you reduce your utilization ratio by making multiple payments.
- Use the card regularly- Placing monthly charges on your credit card is very important. This increases your card activity and helps build your creditworthiness.
Things to avoid
For maximum benefits with secured credit cards, avoid the following things:
- High-interest rates
- Additional and hidden fees
- Cards with high annual fees
- Cards that may entice you with rewards
We at Bonsai Finance can always help you make informed decisions when it comes to choosing these cards. We work with some of the best Canadian credit issuers, therefore help you choose the best card according to your needs.
Secured credit card Canada, therefore, could be considered an alternative for credit building. It is also important to choose the right card and use it wisely for maximum benefits. Contact us any time you need reliable assistance.