The Best Credit Cards to Build Your Credit in Canada

If you have a bad credit score or you haven’t got a long credit history, getting access to loans and credit cards can sometimes be difficult.

You may have to pay higher interest rates, or lenders may simply refuse to lend to you.

As such, you might want to work on building your credit score. One way to do this is by using credit cards for bad credit.

All credit cards can help you build your credit in Canada if you make your monthly repayments on time. But some are easier to apply for if you have a bad credit score.

In this guide, we look at the best credit cards you can use to build credit if you have no or limited credit history in Canada.

Best Secured Credit Cards to Build Credit

Here are some of the best secured credit cards in Canada to build credit:

1. Neo Secured Mastercard

The Neo Secured Mastercard has guaranteed approval, no annual fees, and no over-limit fees, and you can earn unlimited cashback at a rate of 5% on average.

You can increase your limit when you want to. In addition, you can use the insights dashboard to keep track of your spending and add themed perks, including insurance and app subscriptions.

2. Home Trust Secured Visa Credit Card (No Fee)

There are two secured cards from Home Trust: one with a fee and one without. The no-fee card has an APR of 19.99%. You can control your spending limit based on the amount you deposit, from $500 to $10,000.

3. PC Financial Mastercard

There is no annual fee to use the PC Financial Mastercard. In addition, you can earn PC Optimum points on all spending and additional points for spending in certain stores. It’s a great option to earn reward points when you make purchases with your card.

If you have an income of $80,000 or more, the PC Financial World Elite Mastercard offers higher rewards and better perks.

4. Tangerine Money-Back Credit Card

You will need a fair rather than a poor credit rating to apply for the Tangerine Money-Back Credit Card. With this card, you can earn unlimited cashback without paying an annual fee. You can earn up to 2% in two categories of spending and 0.5% on everything else.

5. Home Trust Secured Visa Credit Card (Annual Fee)

The Home Trust Secured Visa Credit Card (Annual Fee) is the same as the free version but with one key difference. In return for paying an annual fee of $59, you get a lower APR of 14.90%.

If you think you will carry a balance, this could work out as the better option because you could make a large saving on your interest payments.

6. Capital One Guaranteed Secured Mastercard

This card has guaranteed approval as long as you meet the conditions, one of which is that you can provide security funds of $75 to $300. In addition, it comes with a few benefits, including Purchase Assurance and some travel insurance coverage.

Related: Capital One Guaranteed Secured Mastercard Review

Best Prepaid Cards to Build Credit

Prepaid cards are another option to build credit in Canada. Here are two of the best:

7. KOHO Easy Mastercard

The KOHO Easy Mastercard is a popular prepaid card in Canada. You will earn 1% cashback on gas and grocery spending and can sign up for the Credit Building service for $10 monthly to build your credit.

8. KOHO Extra Mastercard

The KOHO Extra Mastercard costs $9 per month or $84 per year. You can earn 2% cashback for groceries, transportation, and food and drink purchases and 0.5% on everything else. It also comes with no FX fees, priority support and other perks.

Related: Best KOHO prepaid cards in Canada.

How to Use Credit Cards to Build Credit

When you make purchases on a credit card and make your monthly repayment on time, you build credit.

Your repayments are reported to the credit bureaus in Canada. As long as you don’t miss them, you will improve your credit score.

The opposite is also true. If you don’t make your repayments on time, your credit can be adversely affected.

Always use your credit card with care. Only borrow what you need to, and try to pay off your balance each month to avoid paying interest.

Pros and Cons of Credit Cards to Build Credit

Pros:

• If you pay off your balance in full, you can build your credit score without paying any interest.
• Many credit cards come with rewards and perks you can take advantage of.
• Some credit cards have no annual fee, making them a free option to build credit.
• Secured credit cards are often available to people without good credit scores.

Cons:

• Failing to pay off your balance in full can be expensive due to high-interest rates.
• Many credit cards are only available to people with good credit scores.
• Failing to make a payment on time can have a negative impact on your credit score.

How to Choose the Best Credit Card to Build Your Credit

It’s easy to get credit cards to build credit, but choosing one is not always easy.

When you are choosing a credit card to build your credit, you should first decide if you want a secured or unsecured credit card or whether you would prefer a prepaid card.

Then look at several factors, including the annual fee, interest rate, eligibility requirements, rewards and cashback and choose the card that best meets your needs.

Alternative Ways to Build Credit

There are several other ways to build credit, including:

• Take out a personal loan and make your repayments on time.
• Take out a small line of credit from a bank or credit union.
• Make sure you pay all your bills on time each month.
• Avoid applying for lots of credit cards or loans in a short time.
• Only use a small amount of your total credit to keep your utilization rate low.

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