Credit cards are convenient. Checking into a hotel or booking an airline ticket is a more straightforward process with one. However, not everyone can get a credit card. That’s where guaranteed credit cards come in.

What is a Guaranteed Credit Card?

A guaranteed credit card offers guaranteed and near-instant approval. This is because they often have few requirements. Also, as a condition of approval, all you may need to do is put down a security deposit as low as $50.

Most credit cards require good to excellent credit. However, a guaranteed credit card doesn’t focus on your credit score. So, with a guaranteed credit card, Canadians without good credit can enjoy the benefits of having a credit card.

While they may not have the glitz and glamour of other credit cards, guaranteed credit cards have unique perks. For instance, they can help you rebuild your credit score.

How Guaranteed Credit Cards Work

Like a regular credit card, a guaranteed credit card requires you to apply with a credit card provider. You may have to put down a security deposit if your credit is not ideal. However, you may not need to if you have decent credit.

After you post the deposit, the credit card company will issue your guaranteed credit card. You can then use it like a regular credit card.

Pros and Cons of Guaranteed Credit Cards

While guaranteed credit cards differ from one credit card provider to another, they have some common advantages and benefits.

The Pros of Guaranteed Credit Cards

• Low or no annual fee. Guaranteed credit cards offer annual fees as low as $39 or none. This makes it the perfect card to have when you're looking to minimize your credit card debt.
• No perfect credit is required. Any Canadian with bad credit can apply for the credit card and receive near-instant approval. Your credit score will only determine if you need to make a security deposit.
• Credit score improvement. As long as you make your payments on time, you can improve your credit score when using your guaranteed credit card.

The Cons of Guaranteed Credit Cards

• High-interest rates. Unlike regular credit cards, some guaranteed credit cards have higher interest rates. This often applies when you miss a payment. A credit card issuer will increase the interest rate to offset the risk.
• Low credit limits. You won't receive an extensive credit line, especially if you have poor or non-existent credit.
• Few features and benefits. Most guaranteed credit cards offer basic features. They rarely have rewards benefits.

Choosing the Right Guaranteed Credit Card for You

Finding the ideal guaranteed credit card for you is simple. Consider the following pointers.

1. Ensure the credit card company reports payments to the credit bureaus. If you’re using a guaranteed credit card to improve your credit score, you need your credit card activity reported. Without reports sent to Equifax or TransUnion, it defeats the purpose of a guaranteed credit card.
2. Weigh the interest rates against the annual fee. A credit card with a low or no annual fee often has a high-interest rate. A credit card with a high annual fee often has a low-interest rate. Consider going for a card with a low or no annual fee and high interest instead. Interest is only charged when you carry a balance. However, opt for the low-interest option if you think you'll run a balance you can't pay off by the end of the month.