What is a secured credit card? A beginner’s guide to building credit in Canada

Published on May 26, 2026

Whether you just arrived in Canada with big goals and no local credit history or are recovering after a tough financial season, you’ve likely hit a wall in the credit system. It’s a puzzling contradiction: to get a credit card, you need a decent credit score. But to build up your credit score, you need good credit history. It feels a lot like trying to land an entry-level job that somehow requires three years of experience.

It might feel like an impossible loop to break out of, but there is a tool specifically designed to crack open these financial doors: the secured credit card. Let’s dive into what a secured card is, how it works, and how you can use one to establish your financial foundation in Canada.

What is a secured credit card? 

Let’s clear the air: A secured card is a real credit card, meaning using it can help you build credit in Canada. 

Unlike a prepaid card, it doesn’t require you to put money into your account before you can tap or swipe to pay. It’s also not a debit card that links directly to your chequing account. Secured credit cards work exactly like traditional credit cards, allowing you to pay for groceries, gas up your vehicle, or book a flight online on credit. 

So what’s the difference between a secured card and a standard credit card? 

When you open a secured credit card, you make a one-time, refundable cash deposit to the card issuer. This deposit acts as collateral. Because this safety net removes the risk for the financial institution, chances of approval are much higher. This makes secured credit cards a useful tool for anyone who has been denied for credit by the traditional banking system. 

How do secured credit cards work? 

If you rent the place you live in, you likely had to provide your landlord with a rent deposit before moving in. Your landlord holds on to that deposit as a safety net, allowing you to occupy their property as long as you take care of the space and make your rent payments on time. 

Security deposits on credit cards work the same way. You provide an upfront cash deposit, use your card to pay for goods and services, and at the end of the billing cycle, you receive a statement showing your total balance for your purchases. Just like when you move out of an apartment and get your rent deposit back, you get your security deposit refunded once you close the account or upgrade to an unsecured card—provided your balance is paid in full.

How much do secured credit cards cost?

While some secured credit cards in Canada do not charge an annual fee, they all require an upfront security deposit. The exact figure depends on the issuer, but in most cases, your deposit dictates your credit limit—meaning a $500 deposit gives you a $500 limit.

Beyond the initial deposit, some cards also include a low monthly fee for credit-building tools and rewards. With the Secured Neo Mastercard, for example, you can customize your limit by getting started for a security deposit as low as $50.

Do I get my security deposit back? 

The deposit made on a secured credit card does not go towards your monthly bill. If your statement says you owe $100 this month, you need to pay off that $100 balance, just like a standard credit card bill. If you miss your payments entirely, your card provider will eventually use your deposit to settle the debt and close your account, but doing so will set your credit history backward. 

Secured credit cards aren’t meant to live in your wallet forever. Think of it as financial training wheels. Once you graduate to an unsecured card or choose to close your account with a zero balance, you will get your security deposit back in full¹.

How do secured credit cards improve your credit score?

The real strength of a secured credit card isn’t just its ability to pay for purchases—it’s the track record you build while using it.

Every month, your card provider monitors if and when you paid your balance, how much of your available limit you used, and whether your account was kept in good standing. All this information is then reported to Canada’s two credit bureaus, Equifax and TransUnion. These two compile your credit habits into a report. This is the basis of your credit score. 

By consistently paying off your balance on time, you prove that you are a reliable, low-risk borrower and open up more financial opportunities. 

Do secured credit cards charge interest? 

Just like standard credit cards, secured cards incur interest if you do not pay your monthly balance by the due date. On the other hand, you can avoid interest charges by paying off your statement balance in full every month.

Who are secured credit cards good for? 

Unsure whether a secured credit card is right for you? They can be a great financial launchpad if you identify as part of these groups: 

Newcomers to Canada

Your credit history from your home country doesn’t cross the Canadian border with you. Because Canadian banks have no information on your previous income or credit history, a traditional credit card application can get turned down if you don’t have a reliable source of income lined up yet. A secured card lowers the barrier to entry, giving you the access you need to build your Canadian financial footprint.

Credit rebuilders

Life happens. Job loss, health emergencies and divorce can each cause major financial strain, sometimes resulting in a consumer proposal or bankruptcy. But, using a secured card is a way to show credit bureaus that you’re back on your feet and practicing good financial habits. 

Students and young adults

Ready for your first credit card? A secured option can be a smart first move. Traditional banks can often hesitate to approve first-time credit card applicants with no credit history. Secured credit cards get you into the habit of budgeting and monitoring your balance—all without the risk of spending money you don’t actually have.

Can I change my secured credit card to an unsecured one? 

The goal isn’t to use a secured credit card forever, but to build up your credit score with habits so you can eventually graduate to an unsecured credit card. Keeping your credit utilization low and consistently paying off your statement balance in full and on time every month signals to your card issuer that you’re ready for credit progression.

Most credit providers will automatically review your account history after 12 to 18 months. If your credit score has improved over time and you meet the issuer’s criteria, they may transition you to an unsecured credit card and refund your security deposit.

Find the secured credit card for you

For someone looking to build or rebuild credit, secured cards can be an empowering first step to proving creditworthiness to Canadian credit bureaus.

Ready to take the next step in your financial journey? Apply for a Neo secured credit card—no credit score required.

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Disclaimers

The Neo Mastercard, Neo World Mastercard®, Neo World Elite® Mastercard and Neo Money™ card are issued by Neo Financial™ pursuant to license by Mastercard International Incorporated.

Mastercard, World Mastercard, World Elite, and the circles design are registered trademarks of Mastercard International Incorporated.

¹ Security funds are refundable when the outstanding balance is paid in full and the card account is closed.