Secured Credit Cards

If you’re looking to build or rebuild your credit history, you may have come across the term “secured credit cards.” In this guide, we’ll take a closer look at what secured credit cards are, how they work, and their pros and cons.

What are secured credit cards?

Secured credit cards are credit cards that require a cash deposit as collateral. The deposit is usually equal to the credit limit, which can range from a few hundred to a few thousand dollars. The deposit serves as security for the lender in case you fail to make your payments.

How do secured credit cards work?

Secured credit cards work like regular credit cards, but with a few key differences. You can use them to make purchases, pay bills, and build your credit history. However, you’ll need to make a deposit to open the account, and the credit limit is usually equal to the deposit.

Why get a secured credit card?

Secured credit cards are a good option if you’re looking to build or rebuild your credit history. They’re also a good option if you’re unable to qualify for an unsecured credit card. Secured credit cards are easier to get approved for since they require a deposit as collateral.

What are the requirements for getting a secured credit card?

To get a secured credit card, you’ll need to meet the following requirements:

• Be of legal age in your province or territory
• Have a valid Social Insurance Number (SIN)
• Have a Canadian address
• Have a bank account in Canada
• Be able to make the required deposit

How to apply for a secured credit card?

To apply for a secured credit card, follow these steps:

1. Research different secured credit cards and compare their features and fees.
2. Choose the card that best meets your needs.
3. Apply for the card online or in person.
4. Provide your personal and financial information.
5. Make the required deposit.

What are the fees associated with secured credit cards?

Secured credit cards may have the following fees:

• Annual fee
• Application fee
• Cash advance fee
• Foreign transaction fee
• Late payment fee
• Over-limit fee
• Returned payment fee

It’s important to read the terms and conditions carefully before applying for a secured credit card.

How to use a secured credit card?

To use a secured credit card, follow these tips:

• Use the card for small purchases and pay the balance in full every month.
• Don’t use the card for cash advances or balance transfers, as they usually come with high fees and interest rates.
• Make your payments on time and in full every month to avoid late fees and interest charges.
• Monitor your credit score regularly to track your progress.

How long does it take to build credit with a secured credit card?

It can take several months to a year or more to build credit with a secured credit card. The length of time it takes depends on various factors, such as how often you use the card, how much you spend, and how quickly you pay off your balances. Generally, the longer you use the card responsibly, the better your credit score will become.

Can you upgrade to an unsecured credit card?

Yes, some lenders may allow you to upgrade to an unsecured credit card after a certain period of time, usually 12 to 18 months. To qualify for an upgrade, you’ll need to have a good payment history and a strong credit score.

What are the alternatives to secured credit cards?

If you’re unable to get a secured credit card or prefer not to use one, there are other options to consider:

• Credit-builder loans: These are loans designed to help you build credit. You borrow a small amount of money and make monthly payments until the loan is paid off.
• Authorized user: You can become an authorized user on someone else’s credit card. However, the primary cardholder is responsible for making payments, so it’s important to choose someone who is responsible with credit.
• Secured loans: You can also take out a secured loan, such as a car loan or personal loan, to build credit. Just like with a secured credit card, you’ll need to make a deposit or put up collateral to secure the loan.

How to choose the right secured credit card?

When choosing a secured credit card, consider the following factors:

• Annual fee
• Interest rate
• Credit limit
• Rewards program
• Fees

Choose a card that best meets your needs and has the lowest fees and interest rate.

How to manage a secured credit card?

To manage your secured credit card, follow these tips:

• Make your payments on time and in full every month.
• Don’t max out your credit limit.
• Monitor your credit score and report any errors.
• Use your card responsibly and don’t overspend.
• Review your statements regularly to ensure there are no unauthorized charges.

What happens if you miss payments on a secured credit card?

If you miss payments on a secured credit card, your credit score will be negatively affected. The lender may also charge you late fees and interest charges, and may even take legal action to collect the debt. It’s important to make your payments on time and in full every month to avoid these consequences.

How to close a secured credit card account?

To close a secured credit card account, follow these steps:

1. Pay off your balance in full.
2. Contact the lender and request to close the account.
3. Request the return of your deposit.
4. Wait for the lender to process your request.

Secured credit cards are a great tool for building or rebuilding credit. They’re also a good option if you’re unable to qualify for an unsecured credit card. By following the tips outlined in this guide, you can use a secured credit card responsibly and improve your credit score over time.