Many individuals struggle with building a high credit score. Without a high credit score, you are limited in what credit cards are available to you. To make matters worse, if you have a low credit score, you still need a credit card to build up your credit. This can lead to a vicious cycle, where you need a higher score to get a credit card, but the only way to build your score is with a line of credit. While you may not have access to top-of-the-line credit cards, there are many cards aimed at individuals with low credit scores.
The main purpose of these cards is to repair your score, so there are fewer perks than a traditional credit card. Each card has different rates and limits, and there are even a few cards with some reward options or sign-up bonuses. Listed below are five of the top Canadian credit cards for individuals with bad credit.
Secured vs. Unsecured
Before looking at specific credit cards, it is important to understand the difference between secured and unsecured credit cards. Many of the easier to obtain credit cards for individuals with low credit are secured. With a secured card, you must present some form of collateral when you sign up for the account. Most lenders ask for a refundable deposit. If you default on your payments, the lender keeps the fee.
Unsecured cards do not have any collateral requirements. They are harder to get than unsecured credit cards, typically requiring a credit score between 600 to 650. Unsecured credit cards are more likely to have perks, such as reward points. Both secured and unsecured credit cards help repair your credit, as long as you do not miss any payments.
Home Trust Secured Visa
Visa’s Home Trust card is one of the best secured credit cards. You must have a minimum of $500 to place into your account, but there are no annual fees associated with the card. The interest rate is higher than some of the other secured cards, at 19.99 percent each purchase, but as long as you make timely payments, you will not have to worry about it. There is a small inactivity fee, but this only applies if you do not use the card for a year. As of writing, the Home Trust card is not available to Quebec residents.
Plastk Secured Credit Card
Plastk is unique because it is one of the only Canadian secured cards with benefits. You earn one point for every $1 you spend. At 2,500 points, you become eligible for rewards. This includes merchandise, gift cards and even exclusive event access. Another strength of Plastk is the generous eligibility requirements. Plastk does not have any minimum credit score requirements. All members also gain access to a Plastk app, which allows you to keep track of your points and remaining balance, but also track your credit score.
You must deposit a minimum of $300 when you open an account. As of writing, new users receive 5,000 points after making an account. Plastk has an annual fee of $48, as well as a $6 maintenance fee each month. These extra fees make it a pricier option, especially for a secured card, but if you frequently use your card, the perks typically outweigh the fees.
Capital One Low-Rate Gold Mastercard
Capital One provides both a secured and unsecured Gold card. This version is the unsecured, but if you do not qualify because of a low credit score, you are approved for the secured version. The unsecured card has an annual fee of $79. You can earn miles as you spend, get guaranteed price protection and even receive discounts on baggage and rental insurance. The unsecured gold card has an interest rate of 14.9 percent on purchases, with an increased rate of 21.9 percent for cash advances.
Refresh Financial Secured Card
Refresh is intended for individuals with low credit scores who are unable to find any other card. As long as you make a minimum deposit of $200 into your account, you are approved, no matter what your credit score. Refresh has a low annual fee of $12.95, plus a $3 maintenance fee each month. Another benefit of Refresh is the 21-day interest-free grace period on any new purchase. The first time you go over your balance, you are charged a $5. If you do not use your Refresh card for a month, you must pay a $2 fee.
RBC Visa Classic Low-Rate Option Card
The RBC Visa Classic is an unsecured credit card with a low interest rate of only 12.99 percent. While applicants are encouraged to have a fair credit score, the company looks at your overall financial picture, such as your income to debt ratio and savings, to determine eligibility. Most applicants with at least $15,000 in savings are considered eligible, even with a poor credit score. The Visa Classic comes with several perks, such as purchase protection, fraud liability, and a small discount on gas. It also has one of the lowest annual fees of an unsecured credit card, $20.