True or False: A secured credit card isn’t really a credit card

For this week’s Reality Cheque, we’re looking at the money myth about whether secured credit cards are real credit cards and if using one contributes to your credit history.

By Karen Stevens

A secured credit card may not be the flashiest of financial tools—you’re not likely to be racking up points, scoring free stays at hotels or earning high cash-back rates with your purchases when you use this type of credit card. In fact, some people don’t consider them real credit cards at all, putting them in a category with prepaid credit cards and debit cards. But secured cards are 100% real credit cards—they just work a bit differently than non-secured ones. And just like a regular card, the way you use this powerful credit tool can have a huge impact on your credit score.

How a secured credit card actually works 

As with any credit card in Canada, you should do some research to assess the card and the lender. Check a provider’s website or call its customer service department to make sure your activity on the card is reported to the major credit bureaus, Equifax and TransUnion. Then you know your credit-building efforts are not going to waste. Once approved for a card, you’ll provide a one-time, refundable security deposit—this is the “secured” part. When you’re ready to move on to another credit card or close the account, you’ll get that money back, as long as your bills are paid. 

Another myth is that you pay off whatever debt you have on the credit card with your secured deposit. Instead, think of it like rent. You pay last month’s rent upfront, but you still have to pay rent each month. In the same way, with a secured card you pay your secured deposit first and then make your ongoing payments each month.

Often, it’s easier for someone with limited credit or a low credit score to get a secured card versus another type. You may find yourself in this situation if you’re, say, new to Canada, you don’t have much of a credit history yet, or you have a low credit score, whether the reason is bankruptcy, a history of missed payments or something else. 

“A secured card is meant to be like a bridge back to financial stability,” says Becky Western-McFadyen, Financial Coaching and Education manager at Credit Canada. “It’s the tool that allows you to start that credit-building clock when traditional lenders might say no.”

You use the card just like you would any other credit card: you spend, and then when you pay off your bill (hopefully in full every month), it gets reported to the credit bureaus. With prepaid or debit cards, instead of getting access to credit, you draw down on money in the account. 

How a secured card affects your credit score 

So, how does this type of credit improve your credit score? As you build up a payment history with your card, it gets reported that you’re a reliable borrower who pays your bills in full and on time. So, make sure you never spend so much on your card that you compromise your ability to do that.

Another key concept that will help you improve your score is the credit utilization ratio—that is, how much credit you’re using compared to how much you have available. 

“We want to make sure that we don’t exceed 60% of the utilization rate because that can hamper our ability to build a good credit score,” says Mark Kalinowski, a financial educator at the Credit Counselling Society. Many experts suggest that, as you build your credit score and capacity, you aim for a utilization rate of 30%. The credit limit can be low with secured cards, sometimes around $500, so it’s easy to get close to that limit, even on a single trip to Costco. Be careful as you’re using the card and getting close to your limit.

Can using a secured credit card harm my credit?

If you miss payments or you’re late paying off your bill, then, yes, you could see your credit score go down. “If you miss a payment, it’s reported as a ‘late payment,’ and that can stay on your credit report for six years,” cautions Western-McFadyen. “We would often teach our clients to treat the card like a tool for credit building only; it’s not a way to extend your income so that you never fall into that trap. This is setting you up for success. So, make sure that you’re using it just as if it were a regular card.”

It’s important to note that credit scores don’t report whether the card is secured or unsecured—they just reflect how you use it. “What’s really important, of course, is that regardless of the type of credit card you get, you have to make your payments on time. You don’t want to use too much of the credit available to you because that can impact your credit score. But the type of card—secured or unsecured—isn’t really a factor,” explains Kalinowski.

Secured vs. unsecured cards: Which is better for your credit score?

So, are secured credit cards real credit cards? Yes, absolutely, in every way that counts. However, they might feel different because of the secured deposit and the low credit limit. But when it comes to your credit score, both card types will have the same impact. In the end, it doesn’t matter if your credit card account has the word “secured” associated with it or not—what matters is what you do with it. 

Karen Stevens is a Toronto-based editor, writer, and content strategist, with a background in travel, culture, food and personal finance writing. 

Read more from this issue of The Get:

1. How much do Canadians tip?
2. MVP: Dominique Fils-Aimé on where soul meets self-discovery in her work
3. How can I pay off my student debt?
4. How to manage the costs of being single

-----------------------------------------------------------------------------------

The Get is owned by Neo Financial Technologies Inc. and the content it produces is for informational purposes only. Any views and opinions expressed are those of the individual authors or The Get editorial team and do not necessarily reflect the official policy or position of Neo Financial Technologies Inc. or any of its partners or affiliates.

Nothing in this newsletter is intended to constitute professional financial, legal, or tax advice, and should not be the sole source for making any financial decisions. Past performance is not a guarantee of future results. Neo Financial Technologies Inc. does not endorse any third-party views referenced in this content. Always do your due diligence before deciding what to do with your money.

© 2026 Neo Financial Technologies Inc. All rights reserved.