What’s a secured credit card?
A secured credit card is just like a “regular” credit card but it is secured by a deposit which is used as collateral (hence the name). Card providers provide these secured credit cards to their customers to help them build, rebuild or strengthen their credit profile. The card gets issued after the security deposit is received and the card limit is determined by the security amount.
This deposit then becomes your credit card limit. Which is different from unsecured credit cards, which often require an analysis of your credit report, look at your yearly income and credit score, to determine your credit limit. As such, secured credit cards allow customers to choose their own limit. This feature is unique because clients can set a limit that is sustainable for their income level, budget and needs. This means once you apply for a secured credit card, you are almost always guaranteed to receive your card. With Plastk, you will be instantly approved, once you apply for our card. In order to secure your credit limit, you will have to pay a deposit
Often when individuals fall into debt, it is because they struggled to manage their credit cards effectively. The ability to set your own credit limit, gives one the opportunity to start their secured credit card journey with a limit that is easy to maintain and slowly add more funds to their security deposit, as needed.
One of the most important things you need to know is the difference between secured and unsecured credit cards. Figuring out what is best for you and your needs can help you master your finances in Canada.
The biggest difference between secured and unsecured credit cards is the deposit. Secured credit cards require a deposit in order to secure your credit limit. Your credit limit depends on your security deposit. Unsecured credit cards don’t require a deposit and your credit card limit for these cards depends on your credit history and the amount you are approved for by the lender.
Secured Credit Cards often have instant or easy approval. This means once you apply for a secured credit card, you are almost always guaranteed to receive your card. With Plastk, you will be instantly approved, once you apply for our card. In order to secure your credit limit, you will have to pay a deposit.
This means getting control of your finances is as easy as 1...2...3!
Unsecured cards often require a specific credit score, good credit history and a range of funds available in your bank account.
How can a secured card build my credit?
Since a secured card is backed by a security deposit, most issuers offer guaranteed approval and no credit checks. Just like unsecured credit cards, secured card issuers actually share your activity with major credit bureaus like Equifax and TransUnion. So, if you have poor or no credit you will still be approved and can start building your credit. When you pay your bills on time this improves your payment history, which we saw was 35% of your credit score.
Using your credit card for everyday purchases and paying back your credit balance on time, is the easiest way to build your credit score. Both a secured credit card and an unsecured credit card can help you build your credit history. Having a high credit score can help you make big purchases and gain financial freedom.
This is the biggest difference between a credit card and a debit card. All credit cards help build your credit history, as long as you pay your bills on time.
Who Benefits from a Secured Card?
- Those who have a low credit score, are trying to build their credit, have filed for a consumer proposal or bankruptcy
- New immigrants to Canada
- Younger Canadians just starting to build credit history
- Anyone who is looking to add to their credit mix
Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.
