Most of the big banks in Canada offer secured credit cards. Secured credit cards are credit cards granted to customers who give the bank security for the the credit card limit. It could be a security deposit or collateral like property. In simple terms, you make a deposit or buy a GIC for $500 from the bank and the bank issues you a secured credit card with a limit of $500. If you default on the credit card, the balance held in your account or GIC would be used to offset the credit card balance outstanding.
If you’re a newcomer to Canada, are a student or just don’t have much credit history then you might want to consider applying for a secured credit card from a Canadian bank since most banks would be relunctant to grant you an unsecured credit card.
Here is an example how secured credit cards in Canada works. We will use RBC as the example.
You can apply for RBC secured credit cards (also known as RBC Royal Bank Visa Card). Your application must be made in person at an RBC branch. RBC will hold funds as security for extending and granting you credit, which will be the Visa card. Your security will be placed in an RBC Guaranteed Investment Certificate (GIC) which will earn interest for you. Eventually as you develop a credit history RBC will release the guarantee and will no longer hold collateral against the credit card. So if you wanted to get a credit card with a limit of $1,000 you would be required to take out a $1,000 RBC GIC.
Click the link and read more detailed information about RBC Secured Credit Cards
The main benefit obtaining a secured credit card is to establish credit history so that you can eventually obtain credit for things like loans, lines of credit, and mortgages.
Another product that you might want to consider which is somewhat similar to a Secured Credit Card is Canadian Debit Visa Cards. This is a relatively new product in Canada.
These cards allow customers to make purchases using a Visa number and the purchases are immediately deducted from your bank account. The difference between getting a secured credit card or a debit visa card is that you would not be building your credit with a debit visa card.