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Best credit card for bad credit in Canada for 2023

Best credit card for bad credit in Canada for 2023

Best credit card for bad credit score in Canada

In this article, we provide a listing of the best credit card for bad credit score in Canada

Introduction

In this article we will share the best credit cards to consider if you have a bad credit score and provide fundamental information about credit cards, including how to improve your credit score after obtaining one.

When it comes to getting a credit card in Canada, your credit score is one of the most critical factors that credit card issuers consider when determining your eligibility. Generally, most banks and financial institutions require a credit score of at least 650 to qualify for a credit card. However, if you have a bad credit score or no credit history, you may find it challenging to obtain one.

But don’t worry, having challenges with your credit score doesn’t mean you cannot get a credit card. There are credit cards specifically designed for individuals with bad credit to help rebuild their credit scores over time. By following our tips, you will be well on your way to building better credit and improving your financial health.

Neo Card (Secured)

Neo Card (Secured)

Overall Rating

Annual Fees

Interest

Insurance Coverage

5/5

$0

22.99% (28.99% – cash adv)

Yes

Pros

  • No credit score check required (approval is guaranteed)
  • Low security funds – $50
  • No annual fees
  • Generous 15% welcome bonus on first purchase with supported retailers.
  • Average of 5% unlimited cashback.
  • 0.5% Cashback guarantee.

Cons

  • Their best cash-back offer is only through one partner
  • Optional life, disability and critical illness insurance
  • 19.99%-26.99% Purchase, 22.99%-28.99% cash advance.

KOHO Extra Reloadable Prepaid Mastercard

Best credit card for bad credit score in Canada KOHO Extra Reloadable Prepaid Mastercard

Overall Rating

Annual Fees

Interest

Insurance Coverage

4.6/5

$84

N/A

Yes

Pros

  • No credit check required.
  • It includes several budgeting and spending-tracking tools.
  • Credit reporting service that reports your spending at only $7 per month.
  • Earn 2% interest on your entire balance.
  • 2% cash back on groceries, bills & services, eating & drinking, and 0.5% cash back on all purchases.
  • No foreign exchange fees and 1 free international withdrawal.
  • Free joint account for %0 per month.

Cons

  • You can only use funds deposited on your card
  • It is tech-focused, making it less ideal for non-tech users that are uncomfortable with online banking.
  • Optional travel insurance

Plastk Secured Rewards Card

Best credit card for bad credit score in Canada Plastk Secured Rewards Card

Overall Rating

Annual Fees

Interest

Insurance Coverage

4.2/5

$48

17.99% (21.99% – cash adv)

Yes

Pros

  • Rewards program including 0% interest rate for the first three months and a sign-up bonus of 5,000 points with a value of $20.
  • No foreign transaction fees
  • Gives rewards on every purchase made
  • Monthly credit score update by Equifax.
  • 25 day grace period with no interest.
  • Offers refferal program to earn points.
  • Zero fraud liability

Cons

  • It requires $300 minimum security deposit required
  • It has several hidden fees such as the $35 fee for dishonored payments, the 4.5% foreign conversion fee, and 29.99% interest rate after two late payments in a year.
  • Charges annual fee
  • $48 annual and $6/month

    ($120 total fees)
  • Optional travel insurance
  • 17.99% for purchases 21.99% for cash advances

Home Trust Secured Visa

Overall Rating

Annual Fees

Interest

Insurance Coverage

4/5

$0

19.99%

Yes

Pros

  • Doesn’t charge annual fees
  • Flexible security deposit options
  • Option to upgrade to unsecured card
  • Includes Visa’s Zero Liability Policy for protection against fraud.

Cons

  • It requires a minimum deposit of $500 since it is a secured card
  • Doesn’t offer rewards on purchases like most credit cards
  • Insurance coverage includes Purchase Security and Extended Warranty and Mobile Device Insurance

AC Conversion Visa Prepaid Card

Overall Rating

Annual Fees

Interest

Insurance Coverage

4/5

$0

N/A

No

Pros

  • No credit score check required
  • No foreign transaction fees.
  • Option to load up to 10 foreign currencies in 45 countries
  • Offers 1% cash back on all of your purchases

Cons

  • No traditional credit card features
  • Must have pre-load funds before use
  • This card doesn’t have the option to transfer funds to friends and family.
  • No insurance offered

Capital One Low Rate Guaranteed Mastercard

Best credit card for bad credit score in Canada Capital One Low Rate Guaranteed Mastercard

Overall Rating

Annual Fees

Interest

Insurance Coverage

4/5

$79

14.9% (21.9% – cash adv)

Yes

Pros

  • Lower interest rates
  • It makes it easier to improve your credit limit.
  • Offers both everyday and travel benefits.

Cons

  • Has a high annual fee of $79.
  • Doesn’t have reward programs like most credit cards.
  • Has several restrictions such as not having an existing Capital One account or application.
  • Optional balance protection & zero liability protection insurance
  • 14.9% for purchases and balance transfers and 21.9% for cash advances.

BMO Air Miles Mastercard for students

Best credit card for bad credit score in Canada BMO Air Miles Mastercard for students

Overall Rating

Annual Fees

Interest

Insurance Coverage

4/5

$0

20.99% (22.99% – cash adv)

Yes

Pros

  • Air Miles rewards program (3 miles for every $25 spent at airmiles partners, 2x miles at eligible grocery store).
  • No foreign transaction fees
  • No annual fee required
  • 3% cash back rate for grocery purchases
  • Cash back can be redeemed at any time for as little as $1
  • Additional card at no extra cost

Cons

  • Limited to only students
  • No travel insurance benefits
  • Grocery purchases at Walmart and Costco are only eligible to 0.5% cash back rate not 3%.
  • Extended warranty and purchase protection.
  • 20.99% On purchases, 22.99% for cash advances, and 21.99% Quebec residents

ATB Alberta Mastercard Secured

Overall Rating

Annual Fees

Interest

Insurance Coverage

4/5

$49

19.99% (22.99% – cash adv)

Yes

Pros

  • Flexible security deposit options
  • Up to up to 25% off the cost of a car rental when you participate in Budget and Avis locations

Cons

  • Annual fee of $49 and $25 for each additional card
  • Requires a minimum deposit of $500
  • No reward programs
  • High interest rates
  • Only available to residents of Alberta, for personal use and those who have not declared bankruptcy in the last five years.
  • Balance protection available
  • 19.99% on purchases and 22.99% on cash advances and balance transfers

Capital One Guaranteed Mastercard

Best credit card for bad credit score in Canada Capital One Guaranteed Mastercard

Overall Rating

Annual Fees

Interest

Insurance Coverage

4/5

$59

19.80% (21.9% – cash adv)

Yes

Pros

  • Guaranteed credit card approval
  • Opportunity to improve credit and increase credit limit
  • May not require a security deposit.
  • Offers perks such as purchase assurance, extended warranty, car rental collision & price protection service.
  • Offers several travel benefits, including carrier travel accident insurance, baggage delay and travel assistance.

Cons

  • $59 annual fee
  • High interest rates
  • Very limited rewards program
  • Several restrictive criteria for approval such as the requirement not to have an existing account, pending application or application more than once.
  • Optional balance protection insurance
  • 19.80% on Purchases and Balance Transfers, and 21.9% on cash advances

Capital One Guaranteed Secured Mastercard

Overall Rating

Annual Fees

Interest

Insurance Coverage

4/5

$59

19.80% (21.9% – cash adv)

Yes

Pros

  • Guaranteed card approval
  • Opportunity to increase credit limit (contingent on making payments on time)
  • Easy to qualify (lower credit score requirement)
  • No foreign transaction fees

Cons

  • High interest rates
  • Some hidden fees, including up to $40 for late payment.
  • Requires a minimum deposit or security funds of $75 or $300.
  • No rewards program
  • $59 annual fees
  • Several restrictive criteria for approval such as the requirement not to have an existing account, pending application or application more than once.
  • Optional balance protection insurance
  • 19.80% on Purchases and Balance Transfers, and 21.9% on cash advances

Refresh Financial Secured Visa

Overall Rating

Annual Fees

Interest

Insurance Coverage

4.2/5

$48.98

17.99%

No

Pros

  • Opportunity to increase your credit limit.
  • Flexible security deposit option ($200 to $10,000)
  • Relatively low interest rate compared to other credit cards in its category
  • No credit score requirements

Cons

  • High annual fees
  • No rewards program
  • No insurance packages
  • Mandatory security deposit (between $200 – $10,000).
  • Some hidden fees that could easily drive up your monthly payment.
  • Not available across Canada (limited to certain provinces and/or territories)
  • No insurance offered

Credit card fundamentals

What is a credit score?

A credit score refers to a score (number) that financial institutions use to determine an individual’s creditworthiness based on their credit history. It is typically a three-digit number ranging from 300 to 900, with a higher value representing better creditworthiness. Financial institutions use this score to determine the borrower’s ability to pay back their credit load. 

Having a lower credit score simply means you are less likely to stick to the loan or credit card repayment schedule when you are issued one. Below are the ranges for exceptional, very good, good, fair, and poor credit scores;

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very Good: 740-799
  • Exceptional: 800-850

How to check your credit score?

These scores are generated by credit bureaus, such as Equifax and TransUnion. They use several factors, including your payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries. You can visit their websites to check your current credit score to determine which credit cards you qualify for.

How to improve your credit score?

Once you get a credit card, there are a couple of things you can do to improve your credit score. Here are some simple steps you can take:

  • Pay all your bills on time: As we shared earlier, payment history is among the factors used to determine your creditworthiness. Paying your credit card bills, utilities, rent payments, and/or student loan payments, on time every month will improve your credit score.
  • Keep your credit utilization low: Your credit utilization is the ratio of the revolving credit you’re using to the credit available for you expressed as a percentage. You must ensure your credit utilization is below 30% to maintain a good credit score.
  • Use your credit card regularly: Once you get your credit card, ensure to use it regularly and pay it off on time. This will demonstrate to lenders that you are a responsible borrower.
  • Avoid applying for multiple credit cards: When you successfully get one credit card, it is always best to avoid applying for multiple credit cards in a short period. Having many credit cards at the same time demonstrates to lenders that you are in financial distress or are taking on more debt than you can afford to pay back. This could hurt your credit score.
  • Monitor your credit report: As you take the above steps, you should also regularly monitor your credit report. This will help you identify any errors or inaccuracies that may be negatively impacting your credit score over time.

Secured vs. Unsecured credit card

When you decide to apply for a credit card, you will have to choose between two options – secured and unsecured credit cards. These two options vary in terms of the security required by the card issuer.

A secured credit card requires a cash deposit that serves as collateral in case the cardholder defaults on their payments. Generally, the deposit amount is equivalent to the credit limit on the card. Conversely, an unsecured credit card does not require any cash deposit as collateral. The card issuer will rely solely on the borrower’s credit score to determine their credit limit.

If you have a poor credit score or no credit history, it is likely you will be offered a secured credit card that may come with additional fees and high interest rates. However, there are some issuers who may be willing to offer you an unsecured credit card even if you have a bad credit score.

What to consider when choosing a credit card?

Some of the crucial factors that you may have to consider when acquiring your next credit card include the following;

  • Credit score: Before applying, you must ensure your credit score meets the minimum requirement of the card issuer.
  • Interest rate: If you have a bad credit score, you may end up with a card that has a higher interest rate than average. Compare the interest rates of different cards and choose one that suits your needs.
  • Fees: Check for any additional fees associated with the card, such as annual fees, late payment fees, balance transfer fees, cash advance fees, foreign transaction fees, and more.
  • Rewards: Many credit card issuers offer rewards such as cash back, points, miles, or other incentives for using their card. Consider a card that offers rewards that align with your spending habits.
  • Credit limit: Make sure the credit limit of the card is sufficient for your needs, but not too high that it tempts you to overspend.
  • Security features: Look for a card with security features such as fraud protection, purchase protection, and chip-and-PIN technology to keep your card and transactions secure.

Steps for Acquiring a credit card

These are the typical steps you will go through when acquiring most credit cards;

  • Review your credit score: You should know your credit score before you apply for a credit card. This will help you determine the cards you qualify for. Obtaining and reviewing your credit reports from the credit bureaus also helps you ensure that there are no errors in the report that could harm your chances of getting approved.
  • Assess your credit needs: Consider why you need a credit card and what features would be most beneficial for you. For instance, high credit limit, low interest, high rewards etc.
  • Research and compare credit card options: You can use the information we have shared and additional personal research to determine the credit card that fits your needs and financial situation. Look for cards that align with your needs by comparing the features and terms they offer.
  • Apply for the credit card: Most credit card issuers allow you to apply for their cards online, by phone, or in person. You will have to provide information, including your name, address, employment status, income, and social security number.
  • Receive and activate the card: Once your request is approved, you will receive the card, and you can follow the attached instructions to activate it.

Conclusion

Overall, acquiring a credit card in Canada requires some research and careful consideration. This guide has explored the best credit cards available for people with bad credit scores especially for young adults, including students with no credit history. Therefore, having a bad credit score does not necessarily mean getting a credit card in Canada is impossible.

The goal of obtaining one of these cards is to gradually improve your credit score to secure better borrowing conditions in the future. However, it is important to note that having a bad credit score may limit your options when choosing a credit card. It is worth noting that the credit cards listed above typically come with higher interest rates than traditional credit cards and may not offer as many benefits.

When selecting one of these credit cards, it is crucial to understand the terms and conditions of the credit card you are applying for and use it responsibly to build your credit history and improve your financial well-being.

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