Explainer Credit & rewards · credit score
Secured credit cards, explained for renters starting from zero
A secured card asks you to put money down before you can borrow it. That sounds backwards, but for newcomers, students and anyone rebuilding, it is one of the steadiest ways to start a Canadian credit file.
Credit & rewards To get credit, you need a credit history. To get a credit history, you need credit. Anyone who has arrived in Canada recently, turned eighteen, or come out the other side of a bankruptcy or consumer proposal knows that loop. A secured credit card is one of the main ways out of it.
How a secured card works
With a secured card, you give the issuer a deposit, and that deposit usually becomes your credit limit. Put down $500 and you typically get a $500 limit. You then use the card like any other credit card: you buy things, you get a monthly statement, and you pay it off.
The deposit is not used to pay your monthly bill. It sits with the issuer as security in case you stop paying altogether. You still need to make your payments on time from your own account. That is the point: the issuer reports those payments to the credit bureaus, and that is what builds your file.
The deposit protects the bank. The on-time payments are what protect your credit.
Check that it reports to the bureaus
Not every product marketed as credit-building reports the same way. Before applying, confirm that the card reports to Equifax, TransUnion, or ideally both. A card that does not report does nothing for your score, however well you manage it. Our explainer on how credit scores work in Canada covers why the bureaus matter.
What it costs
Secured cards are offered by several of the large banks and by smaller issuers. Some have no annual fee; others charge one, sometimes as a monthly fee. Interest rates on unpaid balances are often similar to or higher than regular cards, which is a good reason never to carry a balance on one. Look at the total cost over a year, not just the headline.
| What to compare | Why it matters |
|---|---|
| Minimum deposit | Sets your limit; a higher limit makes it easier to keep utilization low |
| Annual or monthly fee | A $0 fee card does the same credit-building job as a paid one |
| Bureaus reported to | Equifax, TransUnion or both; both is better |
| Path to an unsecured card | Some issuers review the account after a period and return the deposit |
| Interest rate | Only matters if you carry a balance, which you should avoid |
How to use it so it actually helps
The habits that build credit with a secured card are the same as with any card, but a small limit makes them matter more. Put one or two small, regular bills on it, such as a phone plan or a streaming subscription. Pay the full statement balance every month, ideally by automatic payment. And keep the balance low relative to the limit.
As an illustrative example, on a $500 limit, a $400 balance uses 80 per cent of your available credit, which tends to weigh on a score even if you pay it off in full. Keeping the reported balance closer to $100, or paying part of it before the statement date, keeps utilization lower.
Rent on a secured card is usually a bad fit
Most landlords do not take credit cards directly, and third-party rent payment services often charge a fee. Rent would also use up most or all of a small limit. Keep the secured card for small bills and pay rent the usual way.
If you want your rent to count towards your credit too, look at rent reporting instead; we explain how that works in can paying rent build your credit? And for why chasing rewards on rent rarely pays, see stop chasing points on your rent.
Moving on from a secured card
After a period of on-time payments, often somewhere between several months and a couple of years, you may be able to move to an unsecured card. Some issuers do this automatically and return your deposit; with others you apply for a new card. Keep the oldest account open where it makes sense, since the age of your accounts is one factor in your score.
The Financial Consumer Agency of Canada has a practical guide to credit reports and scores, including how to order your report for free.
End of the story · 5 min
WAbout the writer
Owen Mackenzie
Credit reporter
Owen spent six years in consumer lending, reading credit files from the other side of the desk. He writes about how Canadian credit scores work, what moves them and what does not, in plain language. His rule for every piece is that a reader should be able to open their own Equifax or TransUnion report afterwards and understand each line on it. He is skeptical of quick credit fixes and prefers the slow, boring habits that actually show up on a file a year later.
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