Prepaid Card vs. Secured Credit Card in Canada: Which Builds Credit?
Both cards can look alike at first glance. Taking a minute to see the difference can save you months.
Quick Answer
A spends money you've already loaded onto it, so it isn't . A is a real credit card backed by a deposit, and your payments can be reported to the credit bureaus. If your goal is to build credit, a secured card is the one designed for that.
According to FCAC, a prepaid card is a payment card you load with money. When you use it, the amount is taken off what's on the card. For prepaid cards issued by a financial institution, FCAC notes:
- You need to put money on the card, and you can reload it as many times as you want until the card reaches its end date.
- You may pay a fee to reload the card.
- Fees lower the value of the card, so you have less to spend.
FCAC also says federally regulated financial institutions must tell you all charges that may apply, and whether the funds are insured by the Canada Deposit Insurance Corporation.
A secured card is a credit card that asks for a deposit, which usually sets your credit limit. You borrow, get a monthly statement, and make payments like any other credit card.
Our guide on how a secured credit card builds your credit walks through the deposit, the statement, and when you might move to a regular card.
Capital One Canada, which offers a secured card, states that a prepaid card "won't help you build your credit history because your activity isn't reported to credit reporting agencies."
A credit card account, secured or not, is credit, and FCAC says lenders send information about your credit accounts to the credit bureaus. Whether a specific secured card reports to both Equifax and TransUnion: varies by issuer. Ask before you apply.
- A prepaid card may fit if you want to control spending, can't or don't want to borrow, or need a card for online purchases.
- A secured card may fit if you're building credit from zero, rebuilding after missed payments, or were recently declined for a regular card.
- Some people use both: prepaid for day-to-day budgeting, and a secured card with one small bill on it, paid in full each month.
- The annual or monthly fee.
- The minimum and maximum deposit.
- The interest rate if you carry a balance.
- Whether the issuer reports to both credit bureaus.
- How and when you can get your deposit back.
What to do now
Take these at your own pace. There's no deadline here.
- 1
If you were recently declined, check your credit report first so you know where you're starting from.
Free credit report guide - 2
Compare secured cards side by side, including fees and deposits.
Compare credit cards - 3
Take one small step at a time. Rebuilding is steady work, and it does add up.
Back to Credit Reports and Disputes
Educational only, not financial advice.