Secured Credit Card Deposits in Canada: How Much You’ll Need to Pay

Are you a Canadian who is just starting your credit-building journey? If so, you may find yourself looking at secured vs unsecured credit cards, trying to decide which one makes the most sense for you. And, in many cases, you might decide that a secured credit card is helpful to build (or rebuild) your credit. But beyond understanding how secured credit cards work, you likely have some questions about the deposit process. In this article, I’ll break down how much secured card deposits are, what affects the amount, and how best to manage this type of card.

Secured Credit Card Deposits Explained

A secured credit card deposit is an upfront, refundable payment. It guarantees your card issuer will receive payment and is the main difference between secured and unsecured credit cards. With an unsecured card, the lender extends credit based on your financial history, including your credit score. No deposit is required. But when you’re just starting or rebuilding your credit, you might not have the credit score you need to qualify for this type of credit card. But you may be able to get approval for a secured credit card instead.

When you open a secured credit card, you will need to make a deposit, which will typically become your new credit limit. Imagine, for example, you’re applying for a secured credit card and you put down a deposit of $500. In this case, your credit limit will likely be $500. The deposit you put down will mirror your credit limit. The deposit works as collateral, your issuer will be able to keep the deposit should you miss a payment. It safeguards them while allowing you to build your credit profile.

Secured Credit Card Deposit Ranges in Canada

In Canada, even the best secured credit cards require a deposit, often ranging from $50 on the low end, up to $10,000 at the high end.  

Let’s look at some examples of the minimum deposit requirements for secured credit cards in Canada:

• Neo World Mastercard Secured: As Finly Wealth’s choice for the “best overall secured credit card,” this option requires a minimum of $50 as a deposit.
• Capital One Guaranteed Secured Mastercard: The “best card for no-income applicants” has a minimum of $49 to $200 as security.
• Home Trust Secured Visa: Finly Wealth has ranked this card as our top choice for a lower interest option. The card has a deposit requirement of $500 to $10,000.

What Determines Your Deposit Amount?

The exact deposit requirements for a secured credit card will depend on a few factors, including:

• Your credit history (or lack of one): If you are new to the world of credit cards, you may need to deposit a higher amount.
• The issuer’s policy: Some cards have fixed deposit amounts, while others give you much more flexibility.
• Your current financial situation and income level: Some issuers will let you make a smaller deposit if they have verified your financial situation to ensure you can afford the payments without financial hardship.
• Desired credit limit: Should you want a higher credit limit on your card, you will need to make a larger deposit to qualify for one. Credit card issuers in Canada often match your deposit amount to your credit limit on a one-to-one basis.  

Is a Larger Deposit Worth It?

Generally, the rule of thumb is that the more money you put down as a deposit, the higher your credit limit will be. And with a higher available credit, the faster you can build your credit score, because having more room on your card can improve your credit utilization ratio.

But a larger deposit isn’t always worth it, though. If cash flow is tight then make sure you don’t deposit more money than you can afford to lock away.

How to Pay the Deposit

After you receive approval for a secured credit card, the next step is to fund your deposit. In Canada, most issuers allow you to make a bill payment, send an e-transfer, or use your debit card. Once the issuer processes your deposit, it can take three to ten business days for your credit card to become active, though the exact timeline depends on the card’s provider.

Tip: Remember, the funds for your deposit must come from your own personal account. This means you cannot use a third-party transfer or a prepaid card.

How to Get Your Deposit Back

Now, you might be wondering: what happens to the deposit over the long run? If your account stays in good standing, your deposit will be returned when you close it. The same applies if your issuer upgrades your account to an unsecured credit card because of your responsible use.

Refunds of your deposit get sent according to the issuer’s policy. In Canada, this is typically by an electronic funds transfer back to your bank account. Or, it may be by cheque. Regardless of the method, it can take several weeks for the issuer to process the refund, so be sure to plan if you are counting on those funds for another expense.

When you won’t receive a refund, though, is if you default on your balance or miss payments. In that case, the issuer has the right to use the deposit to cover the amount you owe them.  

Tips for Managing a Secured Credit Card

A secured credit card is an effective tool for building credit, but it only works that way if you use it wisely. The most important rule? Pay your balance on time. Pay your full balance whenever possible, and not just the credit card minimum payment. Payment history carries the most weight in the calculation of your credit score, which means that even a single missed or late payment can set you back.

Also, maintain a credit utilization ratio of under 30%. This shows lenders that you can manage credit responsibly and that you will not max out your card, which can hurt your credit profile.

Finally, be sure you review your monthly credit card statement. Not only will the habit help you track your spending, but it will also allow you to identify any errors or fraudulent charges. If you spot one, you can then bring it up to your bank’s credit card department before the charge impacts your credit score.

Takeaway

Putting down a secured credit card deposit is the first step of getting a new card and proving your reliability to lenders. Whether you deposit $200 or as much as $5,000, the key is to use your card responsibly by keeping your balance low. And always pay on time. With sound financial habits, you can improve your credit score and transition to an unsecured credit card, where no deposit is needed.

For help choosing your next secured (or unsecured!) credit card, check out Finly Wealth’s credit card comparison tool.