Secured vs Unsecured Credit Cards

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By now we all know there are numerous types of credit cards; cash back, rewards, travel, balance transfer, etc. But, did you also know that there are secured and unsecured credit cards?

What is a secured credit card? What is an unsecured credit card? Is one necessarily better than the other? Depending on your situation, it may make more sense to apply for a certain type of card. Keep reading this post to find out the differences between secured vs unsecured credit cards.

What is a secured credit card?

As you may have figured out from the name, a secured credit card is a credit card that is essentially backed by a security deposit. You, as the cardholder, would provide this security deposit to the financial institution as a guarantee that you will make your credit card payments. If you do not make your payments, the bank or financial institution will claim that security deposit against the outstanding charges.

The security deposit amount depends on the credit card limit and the credit card itself. At its lowest, it will be the amount of the credit limit. So if your credit card limit is $500, that’s the price of the security deposit. However, it can go as high as double your credit card limit so, with our example, it would then be $1000. 

Due to the fact that the security deposit acts as a guarantee, it’s actually very easy to get a secured card which makes them some of the best credit cards for bad credit.

How does a secured credit card work?

Aside from needing the security deposit, a secured credit card works pretty much the same as any other credit card, however, there are not as many perks and it’s not as flexible. For example, secured credit cards are basic credit cards; no rewards or points systems which is why none of the best travel credit cards in Canada are secured credit cards. Additionally, you cannot pay off your bills with a secured credit card like you would be able to with an unsecured credit card.

To make the best of your secured credit card, and to build better credit, you’ll want to pay off, at least, the minimum balance every month. Ideally, more as the interest rates on secured credit cards do tend to be higher. It’s in your best interest both in terms of saving you money and building your credit card to pay off the full amount as soon as possible and not let it build up.

Of course, you cannot use your security deposit to pay off your credit card bills. That is held by the bank.

What is an unsecured credit card?

An unsecured credit card then is, by default, a credit card that does not require the security deposit. In fact, an unsecured credit card is what typically comes to mind when Canadians think of credit cards.

Due to the fact that there is no security deposit requirement, the application process for an unsecured credit card is a bit more in-depth and often requires a monthly income requirement and a good credit score. This is because the bank or financial institution has nothing to fall back on should you not make your payments, so they want to make sure (as much as they can) that you are in good standing and will pay off your balance. Unsecured credit cards also tend to have perks and benefits. Just look at my list of the best cash back credit cards in Canada, you would never get those kinds of benefits with a secured credit card.

Of course, to be able to maintain your good credit score and ability to apply and qualify for unsecured credit cards, you need to stay on top of your payments and pay at least the monthly minimums on time. Check your credit score for free with Borrowell if you’re not what your’s is. 

Secured credit cards vs unsecured credit cards differences

The biggest difference between secured and unsecured credit cards is the required security deposit for secured credit cards. However, there are a few more differences (and similarities) that are worth noting.


  • secured credit cards are easier to apply for, unsecured credit card applications have more requirements to qualify
  • secured credit cards may have a set-up fee (unsecured credit cards do not)
  • secured credit cards are basic, there’s no chance at earning points or rewards vs unsecured credit cards often have perks, bonuses, and rewards programs
  • secured credit cards may have higher interest rates


  • Both types of credit cards will build your credit score
  • Both types of cards may have an annual fee (depends on the credit card)

Secured or unsecured credit cards: which is better?

The best answer to this question is; it depends on your situation. If you’re a young Canadian just starting out with credit cards and building a credit score, or a new immigrant to Canada, or perhaps someone who has filed for bankruptcy in the past or just has a low credit score, then a secured credit card is a smart choice. It’s the best option to help you build poor credit by using a credit card.

If this is not the case, then you are better off going with a secured credit card. They have more perks, benefits, and bonuses that consumers find valuable plus lower interest rates.

With that in mind, here are my top picks for the best secured credit card and the best unsecured credit card in Canada.

The best secured credit card in Canada

There are a few choices for secured credit cards in Canada. As mentioned above, some of higher interest rates but those also tend to charge an annual fee, so it’s best to strategize on this and think ahead when choosing a secured credit card.

Personally, I suggest the Home Trust Secured Annual Fee Visa. It does have an annual fee of $59, however, it also has a low interest rate of 14.90%. This makes it ideal for those who may not be able to pay off the entire amount every month and will have to carry a balance. The minimum deposit required for this card is $500, and all you need to apply is to have a bank account.

The best unsecured credit card in Canada

There is no shortage of unsecured credit cards in Canada, and the best one really depends on what you are looking for. Are you a traveller? Are you a frequent shopper at Air Miles partner stores? Do you want cashback or rewards?

That being said, as a traveller, one of my favourite unsecured credit cards in Canada is the Scotiabank Passport Visa Infinite Card. The card has an annual fee of $139, but you get a sign up bonus of 25,000 points which has a value of $250. You also get a Priority Pass Membership and six free entries, great travel insurance, and the card has no foreign transaction fees. This is one of the best Scotiabank credit cards in Canada and you earn Scotia Rewards points which can be flexible.

Final thoughts

At the end of the day, when it comes to secured vs unsecured credit cards in Canada, unsecured credit cards will likely be your first choice. There is no security deposit required plus you’ll have the option to earn rewards/points and get perks depending on the card. That being said, these cards aren’t always easy to apply for and not everyone qualifies. So, if you are new to Canada, new to credit cards, or building your credit score, then unsecured credit cards are a great option.

Secured vs Unsecured Credit Cards

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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