Are there credit cards for bad credit in Canada?

If you have a anything less than a good credit score (generally speaking, a good credit score starts at around 660) then you might struggle to find credit cards for bad credit in Canada, unless it comes with exorbitant interest rates. The reason lenders charge those with poor credit such high interest rates is to protect themselves from borrowers who have a history of not repaying debts. That’s not to say that everyone with less than stellar credit is bad at making repayments, but given that this makes up 35% of our credit scores, it’s the assumption that most lenders will make. In truth, bad credit can be a result of fraud, divorce, a mistake on your credit report, or simply one old bill that you forgot to pay that went to collections. Whatever the reason for your bad credit, it’s going to make it harder for you to get a credit card.

Credit cards for bad credit in Canada

The good news is, there are credit cards for bad credit in Canada, and finding one that works for you could mean a speedy route to a better credit score – but only if it’s used responsibly. If you don’t use it properly, you could find yourself in debt, and with a worse credit score than when you first started!

When looking for credit cards for bad credit in Canada, it’s important to note how much the annual fee of the card is, and how much interest is charged. Keep in mind, however, that interest is an entirely voluntary payment! If you are using your card responsibly, you will pay off your card in full each month, and not pay any interest! Not only will that keep you from going into debt that you can’t afford to pay back, but it also ensure on-time payments are reported to the credit bureaus which, as mentioned earlier, makes up 35% of your credit score. If you pay your card off in full each month, you will also impact a further 30% of your credit score which is your credit utilization rate (that is, how much of your available credit you are using – learn more about credit utilization here).

As you can see, 65% of your credit score can be affected by the simple act of paying off your credit card each month.

However, credit cards for bad credit in Canada can be dangerous. You may get a card with the best intentions to pay it off each month and not use too much of the credit available to you. Then you are hit with an emergency, or you see a new TV on sale and you want it. As soon as you start using too much of your credit, and not paying it off each month, or worse, not making even the minimum payment each month, your credit score is going to be negatively affected.

Secured Cards for Bad Credit

So, how can you build your credit score without the temptation of a high-interest credit card? The answer is with a secured card. A secured card allows you to enjoy the same convenience, security, and credit-building as an unsecured credit card, without the worry of going into debt. Even those with poor credit, no credit, or a history of insolvency or bankruptcy. With a secured card you can shop online, in store or over the phone, just as you can with an unsecured card.

The main difference is that with a secured card, you will first put down a deposit that is usually equal to the limit you want on the card. So, if you want access to $500 spending, you first make a $500 deposit. At the end of every month, just like with an unsecured credit card, you will (hopefully!) pay off the full amount and avoid paying interest. Your positive payment is reported to both credit bureaus, and will impact your credit score. Even if you can’t always pay off the full amount of your monthly statement amount, always try to pay off more than the minimum. Find out why here!

Depending on your credit card provider, your deposit is only used against your account if no payment has been made to the account in 90 days. In the event that you close the account, your deposit will be returned to you.

Secured cards are a much safer alternative to credit cards for bad credit in Canada. With responsible use, you will be able to steadily increase your credit score, without the risk of getting in over your head with credit card debt that you cannot repay.

Refresh Financial’s Secured Card

Our card is best for those with poor to bad credit. We don’t ask for a minimum personal income amount, and we won’t check your credit score first. Our interest rate is 17.99% but once again, that is only paid if you do not pay the card off each month. Our annual fee is $12.95 plus a monthly fee of $3/month. We structure our fee this way as many of our clients do not need a secured card for a full year – within a few months they have lifted their credit score and are eligible for an unsecured card. So, we do not believe in charging people for a full year, when they may want to cancel after a few months.

Learn more about Refresh Financial’s secured card, and apply for your card today! It takes less than 20 minutes to be approved online!