Choosing a card
Secured Credit Card vs Prepaid Card in Canada
The difference between a secured credit card and a prepaid card in Canada: which one builds credit, what each costs, your protections, and which to choose if you’re new to credit or rebuilding.
What is the difference between a secured credit card and a prepaid card?
A secured credit card is a credit card backed by a refundable deposit that usually sets your limit; you borrow, get a monthly bill and can pay interest. A prepaid card holds money you load onto it first; there’s no borrowing, no bill and no interest.
| Secured credit card | Prepaid card | |
|---|---|---|
| How it works | You borrow up to a limit backed by your deposit | You spend money you loaded in advance |
| Builds credit history | Yes, payments are reported to the credit bureaus | No, it isn’t credit |
| Credit check | Usually limited or none, with the deposit as security | None |
| Interest | Yes, on balances not paid in full | None |
| Upfront money | Refundable security deposit | The amount you load |
| Typical fees | Annual fee on some cards | Purchase, reload or monthly fees on some cards |
Does a prepaid card build credit?
No. Because you aren’t borrowing, there’s nothing to report to Equifax or TransUnion. To build credit you need a credit product that reports your payments, such as a secured or starter credit card.
Some apps pair a prepaid card with a separate credit-building product; it’s that product, not the prepaid card, that’s reported.
How does a secured credit card work?
You pay a refundable deposit, often a few hundred dollars, which usually becomes your credit limit. You use the card like any credit card and pay the bill each month. After a period of on-time payments, many issuers return the deposit or move you to a regular card.
| Card | Annual fee | Purchase rate |
|---|---|---|
| TopCapital One Guaranteed Mastercard | $0 | 29.9% |
Among the credit-building cards we track, the Capital One Guaranteed Mastercard has no annual fee and a 29.9% purchase rate. Building cards often charge high interest, so pay the full balance each month.
What protections do prepaid cards have?
With prepaid cards from federally regulated institutions, the money you load can’t expire, maintenance fees can’t start until 1 year after activation (with some exceptions), and all fees must be disclosed before you get the card. The funds aren’t covered by CDIC deposit insurance.
These rights don’t apply to cards from retailers or provincially regulated institutions, so read the fee box first.
Which should I choose?
Choose a secured credit card if your goal is to build or rebuild credit, and pay it in full every month. Choose a prepaid card if you only want a way to pay online or control spending without any borrowing. Some people use both.
Keep reading
Choosing a cardCredit Card vs Debit Card in Canada: Which Should You Use?When to pay with a credit card and when to use debit in Canada: rewards you give up (about $396 a year on $2,000 a month with the best no-fee card we track), fraud protection, interest, and building credit.
Credit scoresBest Credit Cards to Build or Rebuild Credit in CanadaThe easiest Canadian credit cards to get approved for, secured and guaranteed cards, and the habits that raise your score fastest.
RankingsBest Credit Cards for Bad Credit in CanadaWe record one guaranteed card in the catalogue: the Capital One Guaranteed Mastercard, with no annual fee, a 29.9% purchase rate and no rewards. It is approved against a deposit you provide and reports to the credit bureaus like any other card.- Credit scoresHow to Improve Your Credit Score in CanadaNine steps that raise a Canadian credit score, in order of impact, with how long each takes to show up.
Official sources and further reading
Terms vary by product. Confirm the provider’s current terms before acting. This guide does not predict approval, realized value or credit-score changes. How WalletReturn calculates value