What Is a Security Deposit for a Secured Credit Card?

At Milesopedia, we will be the first to tell you of the amazing benefits of owning a credit card. Flights, Hotels, and more can be earned through strategic and diligent spending. We also stress the importance of making sure you practice safe credit card habits to prevent negatively impacting your credit. Credit cards can be tricky, and many people may feel in the dark about these great options because of their past mistakes.

Getting approved can be tough if you have a bad or no credit history. That is where the security deposit comes in. In this article, we will show you how a security deposit can eventually open up your pathway to establish, build or rebuild your credit and enjoy what is out there.

What Is a Security Deposit and How Does It Work?

A security deposit is a refundable amount of money held by a credit card issuer that acts as collateral for a secured credit card. Even if you have a bad or no credit history, the lender is assured and protected with this security deposit if you stop making payments. This is similar to a renter giving a security deposit before signing a lease with a landlord.

Security deposits also act as your credit limit. Knowing this, you should be very mindful of the amount of money you use as your security deposit, as any late or missed payments will incur additional interest and, most importantly, hurt your chances of building strong payment history.

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Unsecured vs Secured Credit Card

When it comes to credit cards, the name of the game is financial risk. Lenders assess you based on your ability to make consistent payments on time. At first glance, both unsecured and secured credit cards appear to function the same. You can use them for purchases, you are charged interest if you hold a balance at the end of the month and you receive a statement. Despite that, there are some differences that set them apart.

For starters, an unsecured credit card does not require a security deposit to establish. The credit card issuer, in this case, assesses the applicant based on a number of criteria including their credit history and determines whether or not to approve them for a card or an increased credit limit.

In addition, the credit limits for the two cards can be different. You may be eligible for a higher credit limit with an unsecured card as well as more options when it comes to rewards. With secured credit cards, the amounts may vary and a credit card issuer may give you a specific range to follow.

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How to Make a Security Deposit on a Secured Credit Card

As you go through the application process for a secured credit card, you will find that each credit card company has its own processes and requirements. The application is usually online and will ask you to provide personal information like your bank account information and monthly income. From there, you can choose your desired credit limit and make the deposit. Oftentimes, you will make your security deposit on the same day that you complete your application. In some cases, the credit card issuer will allow you to provide your deposit after you have been approved. It is incredibly important that you have enough money come withdrawal time to ensure that your application does not get declined.

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How Much Should You Deposit For A Secured Credit Card in Canada?

While this is a rather personal question and highly dependent on your current situation, here are some things to consider:

According to Equifax Canada, your payment history makes up roughly 35% of your overall credit score. That is massive! With a secured credit card, the point is to show good behaviour which means, paying your card on time and in full. If you have a credit limit above what you can reasonably afford, this will hurt your chances of establishing, building or rebuilding your credit.
Another consideration is your credit limit’s impact on your credit utilization rate. This looks at how much credit you are using compared to your overall limit. A good rate is anywhere below 30%. A larger deposit may give you a better utilization rate, but the tradeoff is poor spending, as a larger limit gives us the false sense of more money.

Your credit card issuer will provide a minimum and maximum deposit amount. Suppose you think a large limit will hurt you rather than help you. In that case, you can consider placing the minimum amount and gradually increasing it as you show the ability to make consistent payments over time.

Best Secure Credit Cards in Canada

Who currently has some great secured credit cards in Canada? Here are our top 3 picks based on the minimum security deposit, flexibility, and fees.

Home Trust Secured Visa Card

Minimum security deposit: $500

Annual fee: 0$

Great for: Newcomers to Canada

The Home Trust Secured Visa Card is the perfect no annual fee secured credit card to help you build your credit up. Ideal for newcomers to Canada with no established credit history, the card comes with a minimum security deposit of $500 and a maximum of $10,000. The card is very standard, not offering much in terms of rewards and holding an interest rate of 19.99%. You could opt for a lower interest rate of 14.90% but that would come at an annual fee of $59.

If you want to learn more about this card, visit the Home trust website for a detailed breakdown!

Plastk Secured Visa Rewards Card

Minimum security deposit: $300

Annual fee: $48

Great for: Rewards earners

Secured credit cards don’t have to be boring. With the Plastk Secured Visa Rewards Card, you can earn 1$ for every 250 points you receive. In addition, All new cardholders receive 5,000 bonus rewards points (a value of $20 (CDN) after 3 months. These rewards points can be used for gift cards, hotel & travel and even can be rewarded to Charity. At an interest rate of 17.99%, the downsides include a $6 maintenance fee and an increased interest rate of 29.99% after two missed payments (ouch).

Neo Financial Secured Mastercard

Minimum security deposit: $50

Annual fee: $0, plus a $9.99 monthly Build fee

Great for: Rewards earners and credit building

No annual fee? Check. Cash back opportunities? Check. Low minimum security deposit and credit building ? Check, check. The Neo Financial Secured Mastercard has it all. This card makes it easy for people to access credit regardless of their credit history with its attractive features. Most impressive of all is an average 5% cashback with Neo partners. On top of that, the card makes an effort to help you through their all-in-one app, to track your spending, auto-pay and flexibility on your credit limits. The trade-off is the $9.99 monthly Build fee, with no waiver based on the balance you keep at Neo, and higher interest rates, coming in at around 19.99%-26.99%. This rate will depend on your application, credit profile and province. Regardless, this is a great card for anyone looking secured credit card in Canada.

Neo now offers two tiers of secured card, World and World Elite. For a detailed comparison of fees, cashback rates and travel perks between the two, check out our Neo Secured World vs Secured World Elite comparison.

Getting Your Deposit Back

The secure credit card deposit is refundable. You will typically receive your money back once you have paid your balance and closed your account or when your secured credit card is converted into an unsecured credit card. For the second option, you should verify to see if your credit card issuer offers this. If this option is available, you may wish to keep the card rather than cancel it as credit history is a component that is considered in calculating your credit score.

So, What?

A secured credit card is an excellent option to establish, build or rebuild your credit. To improve your credit as quickly as possible, you should consistently do the following:

Pay your bill on time and in full, preferably
Keep your credit utilization rate low
Routinely check your credit score
Spend only what you can afford to pay

The length it takes to build your credit varies based on your situation, but you can rest assured that these habits will help you along your credit journey. Will you be placing a security deposit anytime soon?

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American Express Cobalt^® Card

American Express Amex Membership Rewards

Annual fee: $191.88
Our valuationMilesopedia first-year estimate First-year valueWelcome bonus$255Total$255Rewards on your spending are not included. The calculator that adds them from your own profile is on the card's page.: $255
Welcome offerGet 1,250 points after $750 in purchases per month for 12 months: Up to 15,000 points

Apply Now

on American Express's website

Apply with confidenceCheck whether your application will be approved before you submit it, with no impact on your credit score*When you apply for a personal American Express Credit Card, we will tell you whether you are eligible without affecting your credit score. So you can apply with confidence.*Instant decisions are only available for consumer Card applications (also called “personal Cards”).

The American Express Cobalt^® Card is the best credit card from American Express, whether you want points for travel or cash back.

American Express Cobalt^® Card welcome offer

The welcome bonus is paid out monthly over your first 12 months. You earn 1,250 Membership Rewards points for each monthly billing period in which you charge $750 in net purchases to your card, in any category (1X, 2X, 3X or 5X). That adds up to 15,000 Membership Rewards points over the year, a welcome offer we value at $255.

Earning the full bonus means $9,000 in net purchases spread across 12 monthly billing periods. This offer rewards steady monthly spending rather than one large purchase.

You can use these points as statement credits on everyday or travel purchases, at the same rate either way: 1,000 points = $10.

You can also transfer them to Aeroplan, Avios (British Airways and Qatar Airways), Flying Blue, Marriott Bonvoy or Hilton Honors. With the full welcome bonus, that is a choice between:

15,000 Aeroplan points
15,000 Avios points
15,000 Flying Blue Miles
18,000 Marriott Bonvoy points

If hotel points are what you are after, our ultimate guide to Marriott Bonvoy and our complete map of Marriott Bonvoy hotels by category show what those points can actually buy.

American Express Cobalt^® Card benefits

Here is what the card gives you, starting with the benefits cardholders use most.

5X points on eligible eats and drinks in Canada: groceries, restaurants and bars, home food delivery and convenience stores. A spend cap applies.
3X points on eligible streaming subscriptions in Canada.
2X points on eligible gas, public transit and ride sharing purchases in Canada.
1 additional point on eligible hotel and car rental bookings made through American Express Travel Online.
1X point per dollar on everything else, with no category restrictions.
Points that hold the same value either way: 1,000 points = $10 as a statement credit, or a 1:1 transfer to several airline and hotel loyalty programs.
No minimum income requirement, as with every American Express Canada card.
Additional cards at no extra cost: the first and every other supplementary card is $0.
The Hotel Collection: a room upgrade when available, 12pm check-in and late check-out when available, and up to $100 USD in hotel credit on amenities charged to the room for a stay of two or more consecutive nights, booked through American Express Travel.
Front Of The Line^® presale and reserved tickets for concerts and theatre performances, plus offers and events curated for cardmembers through Amex Experiences.
A soft credit check before you apply: you can see whether you will be approved with no impact to your credit score. This applies to American Express personal card applications.

To see how it compares with the rest of the line-up, read our round-up of the best credit cards from American Express in Canada.

The 5X categories and where they apply

The 5X rate is the reason most people carry this card. In Canada it covers four kinds of merchants:

Groceries: Metro, IGA, Sobeys, Super C, Safeway, Whole Foods.
Restaurants and bars: sit-down meals, takeout and drinks.
Home food delivery.
Convenience stores: Couche-Tard, 7-Eleven.

The 2X rate covers gas stations such as Esso, Shell and Petro-Canada, along with public transit and ride sharing.

With the American Express Cobalt^® Card, you earn between 1 and 5 points per dollar:

Category	Points per dollar
Grocery (Metro, IGA, Sobeys, Super C, etc.)	5
Home food delivery	5
Restaurants and bars	5
Convenience stores	5
Streaming services	3
Service station	2
Transport	2
Travel	1
Other	1

That works out to a 1 to 5% return on those purchases. For example, if you spend $1,000 per month across groceries, restaurants and food delivery, you earn $50 back per month, or $600 per year from that category alone. Transfer the points to a program such as Aeroplan instead and the return can be higher.

You can also stack these categories with the hundreds of stores that offer 5x points.

American Express Cobalt^® Card insurance coverage

The card comes with a broad insurance package. The amounts below are the coverage limits; conditions, age limits and exclusions are set out in the certificate of insurance linked in the Insurance section above.

Travel insurance

Emergency medical: up to $5,000,000 for the first 15 days of a trip.
Travel accident: accidental death and dismemberment of up to $250,000 for you, your spouse and dependent children under age 23 when travelling on a common carrier (plane, train, bus or ship) and the tickets are charged to your card. Supplementary cardholders and their families are covered too.
Flight delay: up to $500 for necessary hotel, meal and sundry expenses bought within 48 hours when you are delayed or denied boarding for four hours or more and no other transportation is available. This $500 is an aggregate limit per occurrence, shared with missed connection and delayed baggage coverage.
Delayed baggage: up to $500 for essential clothing and sundries bought within four days when your outbound luggage is delayed six hours or more. This $500 is an aggregate limit per occurrence, shared with missed connection and flight delay coverage.
Lost or stolen baggage: up to $500 per occurrence for all insured persons combined, for checked or carry-on baggage and personal effects in transit, when the airline tickets are charged to your card. Within that limit, jewellery is capped at $300 per occurrence and golf clubs, including golf bags, at $250 per occurrence.
Hotel and motel burglary: up to $500 against the loss of most personal items if your hotel or motel is burglarized, when the stay is charged to your card.

Rental car insurance

Theft and damage coverage is included for a rental car with an MSRP, for its model year, of up to $85,000 excluding all taxes, for rentals of up to 48 days. To use it, decline the Loss Damage Waiver (LDW) or any similar option from the rental company and charge the full rental to your card. There is no cost for this coverage, and it replaces the daily insurance the rental company charges, usually $16 to $23 per day.

Mobile device insurance

Your device is covered for up to $1,000 per occurrence when it is charged to the card, for up to two years from the date of purchase. The payout is based on the depreciated value of the device, which falls by 2% of the purchase price for every completed month, less a 10% deductible. Theft and accidental damage coverage starts on the 91st day after purchase, because the first 90 days are covered by purchase protection.

Purchase protection and extended warranty

Eligible items charged to your card are insured against accidental physical damage or theft for 90 days from the purchase date, up to $1,000 per occurrence for all items combined. The card also extends the original manufacturer’s warranty by up to one additional year on eligible items, with indemnification limited to $10,000 per insured item and $25,000 per Cardmember per policy year for all items combined.

American Express Cobalt^® Card fees

Card fee: $15.99 per month, which equals $191.88 per year, for residents outside Quebec. Quebec residents are billed $191.88 per year.
Additional cards: $0.
Purchase interest rate: 21.99%.
Cash advance interest rate: 21.99%.
Foreign transaction fee: 2.5%.
Minimum income required: none.

Because the fee is billed monthly rather than in one annual charge, you can stop and restart the cost in step with how much you are actually using the card.

Legal

American Express is not responsible for maintaining or monitoring the accuracy of information on this website. For full details and current product information, click the Apply Now link. If you apply and get approved for an American Express Card, we may receive compensation from American Express, which can be in the form of monetary payment.

Annual fee

Primary card$191.88

Additional card$0

Annual income required

Individual$0

Household$0

Conversion fees

2.5%

Earning rate

5xConvenience
5xRestaurants
5xGroceries
3xStreaming
2xTransit
2xGas & EV
1xAll spending

Value

1st Year Value$1,828

2nd Year Value$799

Transfer partners

AeroplanAirline
British Airways ClubAirline
Cathay Asia MilesAirline
Etihad GuestAirline
Flying BlueAirline
Hilton HonorsHotel
Marriott BonvoyHotel

Travel insurance

Travel medical (under 55)Up to $5,000,000 / 15 days

Travel medical (55-64)Up to $5,000,000 / 15 days

Delayed BaggageUp to $500

Lost BaggageUp to $500

Flight DelayUp to $500

Hotel BurglaryUp to $500

Travel AccidentUp to $250,000

Purchase protection

Purchase ProtectionUp to $1,000 / 90 days

Extended Warranty+1 years

Mobile DeviceUp to $1,000 / 2 years

Auto Rental Collision (primary)Up to $85,000 / 48 days

Frequently Asked Questions about security deposits for secured credit cards

Here are frequently asked questions in the milesopedia community about this topic.

How much money do I need to deposit for a secured credit card in Canada?

Minimum security deposits in Canada vary by issuer: the Neo Financial Secured Mastercard accepts deposits as low as $50, the Plastk Secured Visa Rewards starts at $300, and the Home Trust Secured Visa requires a $500 minimum. Maximum deposits typically reach $10,000, which becomes your credit limit. Most experts recommend depositing only as much as you can comfortably manage without overspending, since the goal is to build a positive payment history (35% of your credit score) rather than maximize your credit limit.

Will I get my security deposit back from a secured credit card?

Yes. Your security deposit is fully refundable provided you keep the account in good standing. There are two scenarios for refund: when you formally close the account after paying the balance to zero, or when your issuer converts your secured card to an unsecured card after demonstrating responsible use – typically 12 to 24 months. Home Trust, for example, releases deposits within 60 days of account closure. Some issuers like Plastk also pay interest on your deposit while it is held, which can offset the small annual fee on those cards.

How long does it take to build credit with a secured credit card?

Most Canadians see meaningful credit-score improvement within 6 to 12 months of opening a secured credit card, provided they pay their balance in full and on time every month and keep utilization under 30% of the credit limit. After 12 months of perfect payment history, many issuers will graduate you to an unsecured card and refund your deposit. Equifax and TransUnion update credit files monthly, so the impact is gradual but consistent. Avoid carrying a balance month-to-month, since interest charges on secured cards are typically 19.99%+.

What is the best secured credit card for newcomers to Canada?

For newcomers without a Canadian credit history, the Home Trust Secured Visa is widely considered the best starting point: no annual fee, $500 minimum deposit and approval based primarily on your deposit rather than credit score. The Neo Financial Secured Mastercard is appealing for its $50 minimum deposit and 5% cash-back potential at partner merchants. The Plastk Secured Visa Rewards stands out for offering 1% rewards on all purchases. All three report to both Equifax and TransUnion, which is essential to actually build a Canadian credit file.