Secured credit cards in Canada, including guaranteed cards

A secured credit card is a credit card you get by putting down a security deposit, and the Financial Consumer Agency of Canada (FCAC) says it may be an option for someone with no credit history or with bad credit. The table below ranks these secured cards by what each costs a year to hold, and the first is the Capital One Guaranteed Secured Mastercard. Capital One’s guaranteed secured card, whose approval it describes as guaranteed on stated conditions, has its own section.

Secured credit cards in Canada, ranked

These secured cards are listed from the lowest yearly cost to the highest, with each provider’s deposit terms and its purchase rate.

Welcome offers, first-year fee waivers and fee rebates tied to a bank account, banking package, profession or another card are not included.

Also a secured card: Home Trust Secured Visa.

Capital One says security funds are required for this card and that approval is guaranteed if four conditions are met; the conditions are listed in full under Capital One’s guaranteed cards. Its rate lines give a separate rate for Quebec residents. A cardholder can raise the limit by sending more security funds, on the terms in the line above, which also say the option is closed to some Quebec residents. Capital One's cardholder agreement says that if an account is subject to a foreign currency conversion charge, the charge is set out in the disclosure statement.

The card itself has no annual fee, but Neo says its Build membership, charged monthly, is required to use the secured credit limit, so the table counts the membership as a cost of holding the card. Neo says a Neo Everyday account is opened and funded to set the credit limit, and that security funds can’t currently be reduced once added. Neo lists the purchase rate as a range.

How does a secured credit card work?

Both providers in the table describe a secured card as working like a regular credit card, with security funds set aside before the card can be used. Neo says the credit limit is determined by the amount in the security fund, which a Neo Everyday account is funded to set. Capital One says that, with the cardholder’s express consent and subject to approval, more security funds raise its secured card’s limit by one dollar for each dollar sent, up to a maximum it states; the option is not available to Quebec residents whose annual interest rate is above 22%.

Card issuers give an interest-free grace period to pay for the previous month's purchases, beginning on the last day of the billing period, and federally regulated financial institutions must provide at least 21 days. It doesn't apply to cash advances, cash-like transactions and balance transfers, and interest applies if the balance isn't paid in full by the due date. How interest is charged when a balance is carried is on how credit card interest works.

FCAC notes that errors in a credit report may be the reason an application for an unsecured credit card was refused. Reports and scores are covered in the credit score section.

The security deposit: how much and where it is held

FCAC says the deposit may be a few hundred dollars, or as much as a few thousand. Each provider sets its own amount: Neo’s minimum, maximum and the steps funds are added in are in its entry, and Capital One says security funds are required on its secured card.

Where the money sits differs too:

• Neo says the security funds are held in the cardholder's Neo account, and that a Neo Everyday account is opened and funded to set the credit limit.
• Capital One's cardholder agreement says security funds are not a deposit with Capital One and are held in an account at a depository institution Capital One selects, that any interest earned becomes Capital One's property, and that if the cardholder defaults Capital One may set off and apply the funds against what is owed.

Getting the deposit back

Both providers name closing the account as a way to get the security funds back, and Neo also names an upgrade to a standard credit card. Their terms:

• Neo says the security funds are returned when the account is closed or upgraded to a standard credit card, and are refundable when the outstanding balance is paid in full and the card account is closed.
• Capital One's cardholder agreement says the cardholder has no right to access or withdraw security funds except when the account is closed or when adjustments to the account mean some or all of the funds are no longer required, and that after closing the account it returns or credits any remaining security funds to the cardholder, once the obligations under the agreement are paid in full. The agreement applies to Capital One Mastercard accounts.

Capital One’s guaranteed cards

Capital One describes approval for its Guaranteed Secured Mastercard as guaranteed, and security funds are required for the card. Its conditions:

Capital One says approval is guaranteed if four conditions are met: the applicant is at least the age of majority in their province or territory of residence, has no frozen credit profile and isn't barred from credit for legal or regulatory reasons, has no existing Capital One account or pending application, and has not applied for a Capital One account more than once in the last 30 days, had a Capital One account not in good standing in the last year, or is in legal recoveries with Capital One.

Capital One says "in good standing" means not past due, over limit, fraudulent, restricted, or part of a consumer credit counselling program or bankruptcy.

Capital One’s Guaranteed Mastercard is a different card, for which Capital One says security funds may be required. It is ranked, and offers that ask for money first are explained, on credit cards for bad credit.

Do secured cards build credit? Reporting to the credit bureaus

FCAC says lenders look at a person’s credit report and score when they decide whether to lend and what rate to charge, and that a thin or poor credit history can make a card harder to get. What each provider says about reporting:

• Neo says use of the card is reported to TransUnion and Equifax.
• Capital One says it reports a secured cardholder's payment information to the credit reporting agencies each month, which gives the cardholder the opportunity to build a credit history.

Neo adds that using a secured card and paying on time can help build a credit history. How reported payments feed a score is on building credit, and how the two bureaus’ reports differ is on Equifax vs TransUnion.

Fees and interest on secured cards

The table gives each card’s fees and purchase rate, and the entries add the cash advance rate where the provider lists one. Capital One lists a separate rate for Quebec residents, printed beside its standard rate, and Neo lists its purchase rate as a range. FCAC says interest is charged when a credit card balance isn’t paid in full by the due date. How cash advances are charged is on cash advance limits.

Moving to an unsecured card

Neo says the security funds come back on an upgrade to a standard credit card, as getting the deposit back shows. Capital One’s statement for its secured card is about raising the limit with more funds, in its entry.

When applying for a card without a deposit, FCAC says lenders look at the credit report and score when deciding. What issuers check is on getting approved, cards for a first unsecured card are on your first credit card, and how a hard check differs from a soft one is on soft vs hard credit checks.

Secured card, prepaid card or a first card?

FCAC says a merchant takes each purchase on a prepaid card from the balance loaded on the card. Neo says a secured card isn’t a prepaid card, since the security fund doesn’t pay the card’s balance. Prepaid cards are compared on prepaid cards. Other pages in this group: student credit cards and credit cards for newcomers.

How this ranking works

Cards are listed when their provider describes them as secured cards. They are ordered by yearly cost to hold: the annual fee, plus twelve times the monthly membership a provider says is needed to use the secured limit, which for the Secured Neo Mastercard is the Build membership. Cards with the same yearly cost share a place. Deposits and rates are shown, not scored, and Capital One’s Quebec rate is printed beside its standard rate. The Home Trust Secured Visa is named without figures. How the tables pick cards from this site’s card data, and print a dash where no checked figure is held, is on best credit cards.

Related pages

• Credit cards for bad credit: cards for a damaged credit file.
• Prepaid cards and your first credit card.
• Getting approved: what issuers check.
• Building credit, rebuilding credit after a bankruptcy and the credit score section.