At Plastk we are committed to improving your credit education. For over a year, we have been giving you weekly credit tips, to help improve your financial education. We’ve walked you through the basics of investing as a beginner, buying your first home, your credit score and much more. This week, we decided to bring our blogs back to the basics, by explaining what a secured credit card is and how you can benefit from it.
What is a secured credit card?
A secured credit card is very similar to an unsecured or more traditional credit card. Both cards offer the ability to grow your credit score, credit history and allows you to build positive financial habits. The main difference between these two is that secured credit cards require a deposit to determine your credit limit. This means that everyone will get approved for those cards, given the user supplies the creditor with a security deposit.
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. 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.
What features does Plastk Secured Credit card offer?
Plastk secured credit card offers countless benefits. We've listed a few of the basic perks of using Plastk below.
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Who can benefit from a secured credit card?
One of the biggest misconceptions about secured credit cards is that only those with no credit or bad credit can use them. However, this couldn’t be further from the truth. Secured credit cards can be used by anyone who wants to build their credit, establish credit history or even someone who just wants a new credit card.
New Immigrants
New immigrants to Canada can benefit greatly from using a secured credit card. Often when coming to Canada, immigrants do not have Canadian credit history. Whether you’re coming from a country like Australia or the United States, where credit cards are frequently used or if you’re from a debit or cash based society, like parts of Asia or South America- when you touch down in Canada, it is likely you will have no credit history.
Secured credit cards are great ways to start on your credit journey, as they offer easy or guaranteed approval and the ability to set your own limit. This is great for new immigrants, as the application process is often streamline and they will be able to set a limit that is easy for them to manage.
Students
Most post-secondary institutions do not have credit history or any experience with using a credit card. Establishing credit history is an essential part of life in Canada. This is why it is so important to start your credit journey as early as possible. Secured credit cards are perfect for students because they allow students to set their own limit and get approved instantly. Setting your own credit limit is better for students, because they are new to using a credit card. Often, if one's credit card limit is too high, it can be hard for them to manage. However, if their limit is moderate, they can easily manage their limit with their personal budget. In turn this will help them build their credit score at a young age and be ahead of their peers. Upon graduation, students who used secured credit cards will be confident in using a credit card and likely be able to have more purchasing power, than if they did not use a credit card while in school.
People with Bad Credit
Individuals with bad credit or who have declared bankruptcy, often may feel discouraged when they think about applying for credit. Many credit card companies require a specific income level, credit score or amount of money in a personal checking account. However, secured credit cards require none of this information. This makes secured credit cards ideal for those with bad credit, as they can apply without having to worry about their applications being rejected. The ability to set your own limit also allows credit users to establish a limit that is sustainable for their individual needs.
People with Good Credit
Anyone who needs a credit card, can use a secured credit card. People with good credit can benefit from a secured credit card as it is an easy way to increase their utilization ratio and build their credit mix. It can also be a way to experience the benefits of a different type of card. As we mentioned in prior blogs, each credit card offers different pros and cons. Some cards with higher monthly fees, offer unique rewards or cash back programs which can counteract the costs. Those with high credit scores can use secured credit cards with good rewards systems, for basic costs like groceries or utilities, so they can easily build rewards points.
Why Plastk?
If you haven’t been sold on secured credit cards yet, we are now going to walk you through the Plastk advantage. Plastk offers all the benefits of classic secured credit cards and then some. Our premium rewards program and credit education, sets us apart from other credit card companies. We have a commitment to encouraging financial literacy to all Canadians. We believe that premium rewards and perks should not be reserved for the top 1% of credit scores.
It is important to do your research before applying for a new credit card. This means looking at pros and cons of every card you qualify for, before deciding which card is right for you.
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.
