Secured Credit Cards

Financial Terms Canada -> Secured Credit Cards

A Secured Credit Card is a credit card, which is guaranteed by deposit account, which belongs to the credit card holder. Most credit cards offered by Canadian banks and financial institutions are unsecured, and do not require security deposit. Why would anyone get a secured credit card, if they can get an unsecured one you may ask? The thing is that it’s not always easy to obtain a regular credit card, and in such cases the only choice is a secured one. Examples of situations in which one might need a secured credit card are:

Lack of Credit History – If one doesn’t have credit history in Canada or other major Western country (think about all new immigrants coming to Canada every year) or if one is Canadian out of school without credit history
Past Credit Problems – Canadian consumers with past credit problems, might have problems obtaining unsecured credit card

If you have any of the problems above and you are having hard time getting unsecured credit card, then you can apply for secured credit card. Most big banks in Canada offer secured credit cards, and here is how the process works in general. You apply for a secured credit card and deposit certain amount of money with the credit card issuer. Keep in mind that the credit card issuer might charge you an application fee for the card. If you are approved the bank sets your credit limit as a percentage of your deposit. This percentage will vary with different bank institutions, however you can expect it to be anywhere between 100% and 150% of your deposit. For example if you applied for secured credit card and you were approved for $1,000 credit limit, you might be required to deposit $1,000.

Credit cards play important role in the Canadian financial world (try booking a hotel or flight, or renting a car with credit card) and the secured credit card is a financial product designed to help those who cannot qualify for regular credit card.