11 Best Credit Cards For Bad Credit In Canada (Feb 2024)

September 14, 2022
Blog

There are quite a few credit cards for people with bad credit, but some stand out above the rest for their benefits, including cash back rewards and very low annual fees. I constantly keep up with the latest policy updates and make my recommendations below based on years of experience in the credit card landscape.

I recommend the Capital One Guaranteed Approval Secured Mastercard as Canada's #1 credit card for individuals with bad credit. It is one of the few credit cards that doesn't charge foreign exchange fees on purchases abroad (online or in-person), has no annual fees, and reports monthly to TransUnion and Equifax.

What Is A Credit Card For Bad Credit?

Bad credit credit cards or credit cards for bad credit are a type of secured credit card that allows people with poor credit to access credit cards and start rebuilding their credit. Bad-credit cards are usually divided into secured and prepaid cards. Secured credit cards require a security deposit and are similar to debit cards in that you are limited by how much you deposit. Prepaid cards also work like debit cards, but you are usually limited by your first deposit, and not all allow for reloads; they are also usually store-bound, which means you can only use them at select stores. 

Prepaid cards also have the major drawback of not reporting to credit card bureaus, so you won’t be building your credit anytime soon. On the other hand, secured cards report (usually monthly) to TransUnion and Equifax, the two largest credit card bureaus in Canada. Both cards have the benefit that you will never incur overdraft fees – and there is no revolving balance or due date to keep track of. Some of these cards offer cash back plus other benefits for a reasonably low annual fee. However, most don't charge an annual fee or offer any kind of perk.

Without further ado, here are the best credit cards for bad credit Canada has to offer:

The Best Credit Cards For Bad Credit In Canada

  1. Capital One Guaranteed Approval Secured Mastercard: Best for low minimum security deposit
  2. Home Trust Secured Visa: Best for choosing if you pay an annual fee
  3. KOHO Mastercard Prepaid Card: Best for personalized financial advice
  4. KOHO Premium Reloadable Prepaid Mastercard: Best for physical and virtual card
  5. Neo Financial Mastercard: Best for crediting cash back instantly in your account
  6. Plastk Secured Credit Card: Best for zero introductory interest rate
  7. President's Choice Financial Mastercard: Best for generous welcome bonus
  8. Refresh Financial Secured Visa Card: Best for guaranteed approval
  9. Scotiabank Value Visa Card: Best for complimentary medical insurance

What Is A Bad Credit Score?

Credit score numbers in Canada range from 300 to 900; the higher the number the more trustworthy they deem you, and the better the perks and benefits you will be able to access. In fact, some credit cards have specific credit score requirements to apply. Here’s a breakdown so you can see how you stack up:

  • Excellent credit score: Between 760-900
  • Very Good credit score: Between 725-759
  • Good credit score: Between 660-724
  • Fair credit score: Between 560-659
  • Bad credit score: Between 300-559

What Are Credit Card Bureaus?

Credit bureaus – also known as Consumer Credit Reporting Agencies – are private companies that collect and aggregate credit card information about you and how you’ve used your credit in the past. It tracks things like how long you’ve had credit, if you miss your payments, how many credit cards you have, and more. Here’s a list of all the factors that can affect your credit score:

  • Length of your credit history
  • If you carry a balance on your credit cards
  • If you frequently miss payments
  • Amount of outstanding debts
  • Credit card utilization rate
  • Number of recent credit card applications
  • Records of insolvency or bankruptcy

In Canada, there are two major credit bureaus: TransUnion and Equifax. They assess your credit based on the parameters listed about your credit history and rank you based on how likely you are to pay back a debt. 

Pros & Cons Of A Credit Card For Bad Credit

Pros: Why A Bad-Credit Credit Card May Be Worth It

  • Reports monthly to credit card bureaus
  • Great for rebuilding your credit score
  • No risk of overspending
  • Low-to-no credit score requirements

Cons: Why A Bad-Credit Credit Card May Not Be Worth It

  • Very limited perks and benefits
  • Some cards have high-security deposit requirements
  • Your security deposit is locked in the account until you close it
  • You can still lose credit score points if you fail to pay your balance on time

Types Of Credit Cards For Bad Credit In Canada

#1 Secured Credit Cards

Secured credit cards require new users to provide a security deposit before they can start using the card. This deposit is used to offset the lending risk that credit card companies take by issuing a card to someone with bad credit. It also works as collateral and a credit limit; cardholders can never spend more than the money that was deposited.

#2 Prepaid Credit Cards

A prepaid credit card is a type of credit card that allows customers to make purchases from the funds loaded onto the prepaid card. Unlike traditional credit cards, prepaid card users don’t borrow money from credit card companies – instead, users have a credit limit equal to the amount they deposit. One limitation is that some prepaid cards are store-bound and can only be used at select stores.

#3 Guaranteed Approval Credit Cards 

Guaranteed approval credit cards are just regular credit cards that are guaranteed to approve your application. This type of card is usually considered a sub-type of secured card that comes with guaranteed approval. Like secured credit cards, they’re very limited in terms of perks and benefits.

How To Choose A Credit Card For Bad Credit In Canada

Credit Bureau Reporting

If you have a bad credit score, the main reason for getting a credit card is to rebuild your credit score. First, you should check if the credit card company reports to credit card bureaus. Credit bureaus collect information about your repayment history, utilization rate, and public records like bankruptcies, and these are the reason your credit score goes up or down. The two biggest bureaus in Canada are Equifax and TransUnion; make sure your credit card issuer reports monthly to both of these.

Annual Fee

If you have bad credit, the last thing you want is an annual fee. Most cards available for people with low credit – secured and prepaid – have very limited perks and rewards, and it’s usually not worth it paying an annual fee for that. Look for a card that charges no annual fee; you can always apply for a dedicated rewards card that will offer better perks.

Low Minimum Deposits

Another limiting factor is the minimum deposit. Cards for people with bad credit usually work by providing you a line of credit that matches your security deposit. However, some issuers have very high minimum deposits in place, which may not be ideal for all customers. You may want to look for a card that has a low minimum deposit.

Upgrade To An Unsecured Card

After you’ve built up your bad credit, you’ll want to upgrade to a credit card that offers better benefits and perks, like a cash back or travel card. Check if the card issuer offers the option to upgrade your secured or prepaid card to an unsecured one with better rewards – it’s okay if it doesn’t, you can always look for a dedicated rewards credit card after you improve your credit.

How To Apply For A Credit Card For Bad Credit In Canada

Age

In Canada, the minimum age to request a credit card is the age of the majority. Teens under that age can’t get approved for credit cards but can be added as authorized users to one of their parent’s credit cards. For reference, the age of the majority in Alberta, Manitoba, Ontario, Quebec, Prince Edward Island, and Saskatchewan is 18 years old. In all other provinces, the age of the majority is 19.

Residency Status

Canadian credit cards are available to residents and non-permanent residents. However, most premium credit cards require you to be a Canadian resident. For other card types like prepaid and secured credit cards, you don’t even need a credit history. At the end of the day, residency requirements will depend on the specific credit card issuer and the type of card.

Minimum Security Deposit

Most credit cards for people with bad credit require a security deposit. This amount ranges from $200 to $500, and is returned in full after you cancel your credit card – as long as your account is in good standing.

Bad-Credit Credit Cards FAQs

Are Cash Back Credit Cards worth it?

Bad Credit cards might be worth it for you:

  • If you have a low credit score and are looking to rebuild it
  • If you’re looking for a credit card with a low-to-no annual fee
  • If you want to limit your spending and are looking for a card that can help you manage your budget

Bad Credit cards might not be worth it for you:

  • If you are looking for a credit card with lots of perks and benefits 
  • If you have a high credit score and can apply for cards with better rewards

What Is The Best Free Credit Card For Bad Credit In Canada?

The best free Bad Credit card in Canada is the Neo Financial Mastercard. It features a 15% cash back on your first purchase, a quick sign-up process, and the option to sync it with your Apple and Google Pay to earn cash back on online purchases

Can I Get A Credit Card With Bad Credit In Canada?

Yes, you can get a credit card in Canada even with bad credit. You may not be eligible for premium cards that offer the best benefits, but secured and prepaid cards usually have low-to-no credit score requirements.

How Can I Fix My Bad Credit In Canada?

Secured credit cards are one of the best ways to rebuild your credit – as long as you make your payments on time. Other ways to rebuild your credit are to limit your number of credit card applications (hard checks will hurt your credit score in the short term), keep your utilization percentage on your credit cards low (less than 35%), and use different types of credit.

How Long Does It Take To Rebuild Your Credit In Canada?

It can take from three to six months to see an improvement in your credit score. Ultimately it will depend on your starting score and the credit score you’re aiming for; it can take years of paying your bills and credit on time.

Is It True That After 7 Years Your Credit Score Is Clear?

Yes, after 6 years, your credit score is cleared of all information that affects negatively your credit score. Here are some examples of negative information:

  • Missed payments on a debt (includes credit card debts)
  • Accounts sent to a collection agency
  • Bankruptcies

Keep in mind the debt is not cleared – just the negative information that appears on your credit report.

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