How can a guaranteed credit card help me?
A guaranteed credit card is also known as a secured credit card. It is “secured” or “guaranteed” because of the money the card issuer asks the credit card holder to put down as a deposit. The limits are smaller and typically range from $300 – $2500 and although your money is being held you still need to make payments on the balance of the card.
These cards are extremely common if the card holder has had poor credit in the past and there is a perceived risk that they may not pay back the balance.
When you have a guaranteed credit card you are able to get credit. Your deposit is held so there is little to no risk for the card issuer, but you still gain the positive credit by making your payments on time. Quite often after having a guaranteed credit card for a while, you will be given the option of taking back your money. This a great way to rebuild your credit and get a card, when you might not have been able to ordinarily.
No – A prepaid card is not going to help you build your credit. See the example below:
Example 1 – Guaranteed Credit Card
Example 2 – Prepaid Credit Card
With a guaranteed credit card the deposit is not used for the payments The only time the deposit is used is if the account goes delinquent for 150-180 days or is closed (which would defeat the purpose since we’re trying to rebuild our credit ).
Guaranteed credit cards can be a huge tool for no credit Canadians to build their credit, or for bad credit Canadians to rebuild their credit!
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