In addition to standard, gold and platinum cards, there are some specialized credit cards that cater to special needs. Some of these specialized cards include:
A secured credit card is a card that requires you to pay the issuer a security deposit before you can use it. Your credit limit is normally set as a percentage of your deposit (usually 100 percent or more). For example, if you pay a security deposit of $500, you would normally get a credit limit of $500 or more.
You might consider applying for a secured credit card if:
To obtain a secured card, you'll need to deposit a sum of money with the credit card issuer. Depending on the credit limit you request, the required security deposit for a secured card can range from a few hundred to several thousand dollars.
As well as the security deposit, you may be charged a one-time "set-up" or application fee. Before you apply for a secured card, be sure to ask the credit card issuer whether you will have to pay a fee and whether it will be refunded if your application is turned down.
Your credit limit is normally set as a percentage of your deposit (usually 100 per cent or more). For example, if you provide the credit card issuer with a deposit of $500, you will likely be granted a credit limit of $500 or more. If you don't make your credit card payments, the credit issuer may use your deposit to pay down your credit card balance.
Making all your credit card payments on time will help you build a credit history or rebuild a poor credit score. Once your credit score is considered satisfactory, you may be eligible for an unsecured credit card, such as a low-rate or regular-rate standard card. At that time, the security deposit may be returned to you if you decide to close your credit card account after paying off the entire balance.
Secured credit cards normally have a higher interest rates than unsecured cards. Secured credit cards also usually have monthly or annual fees and, like other cards, have service fees associated with some transactions. For more details, see Understanding Credit Card Fees.
Most secured credit card issuers will pay you interest on your security deposit.
The financial institution that holds your deposit is either your credit card issuer, or another financial institution chosen by the issuer. No matter who holds your security deposit, check with your card issuer to see if your deposit is insured with the Canada Deposit Insurance Corporation (CDIC) or a provincial deposit insurance corporation.
CDIC insures eligible deposits (up to a limit of $100,000) held in financial institutions regulated by the Government of Canada. This protects you if the financial institution holding your deposit declares bankruptcy. For more information, visit CDIC's Web site or call CDIC toll-free at 1-800-461-2342.
Every province also has a deposit insurance corporation that protects deposits held at the financial institutions it regulates.
Before applying for a secured credit card, check your credit report periodically with the two credit-reporting agencies in Canada: TransUnion and Equifax. If your credit report contains an error, have the error corrected immediately, since it may prevent you from getting an unsecured card. For more information on getting a copy of your credit report or correcting errors, see Understanding Your Credit Report and Credit Score.
Here are some precautions you should take when looking for a secured card:
Student cards are meant for students with limited incomes and generally have lower credit limits than regular credit cards. Low-interest rate student credit cards are available.
A U.S. dollar card may be right for you if you often shop in the United States and have a U.S. dollar account you can use to pay your credit card bill. With a U.S. dollar card, no foreign currency conversion mark-up is applied to purchases in U.S. dollars.
Retail cards offer discounts or reward programs at specific stores or retailers. Retail cards generally have much higher interest rates than regular credit cards. This type of card can usually be used only at the store that issued the card.
A retail card may be worthwhile if you shop at one particular store enough to benefit from its reward program. Be sure to weigh those potential benefits against any interest or fees you may pay.
Sometimes retailers offer extended interest-free periods on purchases made with their credit card. The terms and conditions of these offers can vary, but generally, if you haven't paid the balance in full by the time the interest-free period ends, you will have to pay interest from the date you made the purchase. Since the interest rate for retail cards is higher than for regular credit cards, this can end up being very expensive.
Retailers will also sometimes offer you an instant discount on your purchases if you sign up for and use a store credit card. While the discount is attractive, keep in mind that the interest rate on any balance that you carry on the card is generally much higher than with regular credit cards. If you aren't able to pay off the balance right away, the interest costs could be more than the discount.
Compare specialized credit cards with FCAC's Credit Card Selector Tool.