Credit Cards That Are Ideal For Canadians With Bad Credit

Having poor credit can pose significant challenges in today’s digital world. Simple tasks like purchasing online or booking accommodations can become daunting without a credit card. Moreover, with the current reliance on digital transactions, having no access to a credit card can be more than inconvenient—it can be practically essential, especially during circumstances like the ongoing pandemic.

If traditional credit cards are out of reach due to bad credit, there are still options available for Canadians. While these options may come with higher interest rates and lower limits, they serve as lifelines for individuals looking to rebuild their credit. Initially, you may need to consider secured credit cards as a starting point. However, responsible usage of these cards can significantly contribute to the process of rebuilding your credit. Explore these options to begin your journey toward financial recovery.

Here’s a straightforward secured card option to kickstart your credit journey. It features a standard 19.99% interest rate and doesn’t charge an annual fee. To secure the card, you’ll need a minimum deposit of $500. If you commit to clearing your balance each month, the interest rate becomes less significant, and you avoid annual fees altogether. However, note that there’s a $12 inactivity fee if the card remains unused for 12 months, so it’s wise to make occasional small purchases and promptly pay off the balance.

Alternatively, there’s a variant of this card available for a $59 annual fee, offering the same secured benefits but with a lower interest rate of 14.9%. Yet, especially when rebuilding credit, it’s advisable to avoid carrying a balance regardless of the interest rate. The advantage is that the Home Trust Secured Visa typically approves nearly all applicants who can provide the required security deposit.

Consider the Capital One Low Rate Gold Mastercard as an unsecured credit card option. It’s tailored for individuals with lower credit scores. Despite its $79 annual fee and 14.9% interest rate, it offers several perks that may justify the additional cost.

Firstly, unlike secured cards, no security deposit is required to obtain this card. Additionally, it provides price protection (up to $100 per item, capped at $500/calendar year), common carrier travel accident insurance, and baggage and rental vehicle insurance, making it a suitable choice for budget-conscious travelers. If you don’t qualify for this card, Capital One also offers a secured Mastercard alternative.

The Scotiabank Visa card offers a higher tier compared to the previous options listed. However, it does come with additional eligibility requirements. Firstly, applicants must have no history of bankruptcy in the past seven years. Additionally, a minimum annual income of $12,000 is necessary, supported by tax returns or paystubs. Once these criteria are met, applicants can expect a card with a minimum credit limit of $500 (potentially higher), a competitive 16.99% interest rate, and no annual fee.

Furthermore, there may be an introductory offer of 3.99% on balance transfers, providing an opportunity to reduce interest expenses on existing credit card balances.

The Refresh Secured Visa shares similarities with other cards mentioned here, yet it also stands out in a few ways. While its interest rate (17.99%) and annual fee ($48.99) fall within the typical range, what sets it apart is its guaranteed approval without a credit check. However, you still need to provide the upfront security deposit. Additionally, cardholders gain access to Refresh’s Financial Intelligence Training, an online program aimed at enhancing credit scores and overall financial health. Moreover, there’s a bonus of $100 for each successful referral, offering an enticing perk for cardholders to utilize.

If your credit falls within the “fair” range, you might consider applying for the RBC Visa Classic Low Rate card, although it typically requires slightly better credit. With a low annual fee of $20 and a favorable interest rate of only 12.99%, it offers decent value.

However, keep in mind that if your credit score is low, you may not qualify for the lower interest rate and could end up with a higher rate of 19.99%, making the card less attractive. Nonetheless, the RBC Visa Classic Low Rate card does come with some appealing perks, including purchase protection, zero fraud liability, and a discount of three cents per liter at Petro-Canada stations, along with a 20% bonus on Petro Points.

For those with lower credit scores, the TD Emerald Visa presents an appealing option. With a modest annual fee of just $25 and a variable interest rate ranging from as low as 4.5% to a maximum of 12.75%, it offers flexibility. Additionally, you can add supplementary cardholders at no extra cost, making it convenient for family members.

The card comes with valuable features such as Visa Zero Liability protection, Verified by Visa online shopping protection, and Instant Fraud Alerts. It supports Apple Pay and provides additional savings on Avis or Budget rental cars. Moreover, the TD Emerald Card is suitable for balance transfers or debt consolidation, especially if you qualify for a favorable introductory rate in the initial year.

The BMO Preferred Rate Mastercard caters to individuals with fair credit, offering an opportunity to build their credit profile. However, eligibility may be restricted for those with low credit scores or past bankruptcies.

With an interest rate ranging from 11.9% to 17.5%, depending on credit history, and a modest $20 annual fee, it provides reasonable terms. Additionally, it features an appealing introductory offer for balance transfers. Moreover, the card offers travel benefits, purchase protection, extended warranties, roadside assistance, medical coverage, and trip cancellation protection.

If you’re unclear about the difference between secured and unsecured credit cards, here’s a quick overview. A secured credit card entails providing a cash deposit equivalent to the credit limit, typically ranging from $500 to $1,000. While it may seem counterintuitive to tie up your funds, there are long-term benefits. Firstly, you’ll eventually receive this deposit back. If you’ve demonstrated responsible card usage (usually within a year), the credit card issuer will refund the deposit. Secondly, it’s among the most effective methods for establishing, building, or repairing your credit history.

On the other hand, an unsecured card is the conventional credit card you’re likely familiar with. No upfront payment is required, apart from possibly an annual fee. You gain immediate access to the full credit limit. Subsequently, you’re accountable for any purchases and associated interest charges. At the very least, you must meet the monthly minimum payment, although relying solely on this could prolong the repayment process significantly.

After successfully obtaining a new credit card, it’s crucial to use it responsibly to build your credit profile. Here are some essential guidelines:

  • Timely Payments: Ensure that you always pay your bills on time, even if you can’t clear the entire balance. Setting up reminders in your phone or banking app can help you stay on track.
  • Regular Usage: Contrary to a common myth, using your credit card responsibly can actually improve your credit score. So, go ahead and use it for purchases, but do so wisely.
  • Limit Credit Utilization: Keep your credit utilization ratio below 30% of your available credit limit. Exceeding this threshold may raise concerns among potential lenders about your debt management.

If navigating the modern world without a credit card seems challenging, don’t lose hope. There are options available for individuals at every credit level, including those with poor or bad credit.