Bad credit can feel like a never-ending cycle - it prevents you from accessing the financial products you need to get back on track, and this, in turn, perpetuates your bad credit. However, there is hope! Today, we will discuss the best credit cards for bad credit in Canada and show you the ropes to rebuild your financial standing. So stick around, and let's turn your situation around together!
Credit Cards For Bad Credit Canada Table of Contents
What are Credit Cards for Bad Credit?
Credit cards for bad credit, also known as secured or subprime credit cards, are specifically designed for individuals with low credit scores who cannot qualify for a regular, unsecured credit card. These types of cards typically require a security deposit, which serves as collateral, protecting the card issuer against potential default. The credit limit on these cards is generally equal to the amount of the deposit made.
Why You Should Consider a Credit Card for Bad Credit
While it may seem counterintuitive to apply for a credit card when you're struggling with bad credit, there are several reasons why it's worth considering:
- Rebuilding your credit score: A key reason for obtaining a credit card for bad credit is to rebuild your credit score over time. By making regular payments on time, you demonstrate that you can be responsible with credit, and this can help improve your credit score gradually.
- Access to credit when needed: Though these cards often come with a lower credit limit, they can still provide a financial lifeline in case of emergency or when you need to make a purchase but don't have the cash on hand.
- Potential upgrade to an unsecured card: Some issuers offer the option of upgrading your secured credit card to an unsecured card once you have improved your credit score, ultimately giving you access to better financial products with better terms and benefits.
Best Credit Cards for Bad Credit in Canada
Below are some options worth considering when looking for the best credit card for bad credit in Canada:
- Home Trust Secured Visa Card: With no annual fee and a security deposit between $500 and $10,000, this card could be an excellent starting point. It allows you to benefit from easy approval and an interest rate of 19.99% on purchases.
- Capital One Guaranteed Secured Mastercard: This card offers a guaranteed approval process, with a minimum security deposit of $75 or $300. Annual fees are $59, and the interest rate for purchases is 19.8%.
- Refresh Financial Secured Visa: The Refresh Financial Secured Visa boasts a credit limit ranging from $200 to $10,000, with a low annual fee of $48.99 and a 17.99% interest rate on purchases. The card also offers a free financial education program to help you better manage your finances.
- Bridgewater Bank Bimi Card: This newly launched secured credit card offers a minimum credit limit of $500 and no annual fee, and a 21.99% interest rate on purchases, making it a fantastic option for individuals looking to rebuild their credit score.
Credit Cards For Bad Credit Canada Example:
Let's assume John currently has a bad credit score due to financial struggles brought on by an unexpected layoff. Desperate to rebuild his credit score, he learns about securing credit cards for bad credit and decides to research his options.
He applies for the Home Trust Secured Visa Card with a $1,000 security deposit, and within a few weeks, he is approved. For the next 12 months, John uses the card responsibly for small purchases, ensuring all payments are made on time and in full. Over time, he notices his previously low credit score gradually improving. By the end of the year, John is eligible to get an unsecured credit card with better terms and rewards, and his financial life goes back on track.
So, there you have it! Getting your financial life back on track can feel daunting, especially when you're dealing with bad credit. But with the right tools and strategies, you can rebuild your credit score and open up a world of better financial opportunities. If you enjoyed this article and would like to share it with others, please feel free to do so! And don't forget to check out other guides on Flik Eco for more tips on personal finance, investing and beyond.