Prepaid credit cards in Canada do not require you to have a good credit score. This is because they only allow you to use the amount that has been loaded onto the card.
There is also no overdraft with a prepaid credit card. Therefore, if you put $1,000 onto a prepaid card and try to spend more than that, your purchase will be denied. This feature can be seen as a benefit, as it limits spending.
The benefits of a prepaid credit card include:
In Canada, there are two credit card networks that offer prepaid credit cards.
In the past, American Express also offered a prepaid credit through the Amex Bank of Canada. Amex no longer issues prepaid cards.
There are two variations of prepaid credit cards in Canada, including:
You can load money onto a prepaid credit card via the following methods:
Prepaid credit cards also make great gifts. Cards that are preloaded with a given denomination provide a great alternative to cash. This allows the recipient to spend the money as they please, including using the prepaid credit card online.
Mastercard provides prepaid gift cards in the following denominations:
Visa offers prepaid gift cards in the following denominations:
To determine the best prepaid credit card in Canada, we took into consideration the following:
Some prepaid cards come with mobile app capability. This feature can help you track your spending and manage your card. A mobile app can also be used to reload your card with more funds.
When choosing the prepaid credit card that is best for you, look for one with a mobile app. This will ensure you can manage your money on the go.
Look for prepaid cards that allow you to enjoy the same perks as traditional credit cards. For example, it’s possible to find a prepaid credit card in Canada that offers cash back and rewards.
These cards function like a chequing account. They require you to deposit a predetermined amount onto them. After depositing funds, you can use the card for purchases and earn up to 2% cash back - just like an unsecured credit card.
Some prepaid cards also have features that allow you to enhance your savings. Look for a card that has the option to round up purchases.
This type of prepaid card will round up your purchases to the nearest dollar amount. The rounded portion will then be transferred to your savings account.
For example, if your purchase comes to $15.20 and you choose to round up to the nearest dollar, $0.80 will be transferred to your savings account (i.e. $15.20 is rounded to $16.00. $16.00 - $15.20 = $0.80).
You will generally have the option to round up to any of the following:
Pay close attention to card fees when choosing the best prepaid credit card. Several fees can be associated with prepaid credit cards, including:
Look for a Canadian prepaid credit card with low or no fees.
It’s also important to consider the credit limit of a prepaid credit card. Some prepaid cards allow you to load up to $20,000. However, others have a very small credit limit.
Choose a prepaid card that has a credit limit that works for you. If you are giving the card as a gift, a low credit limit may be suitable. However, if you intend to use the card while you travel, you may require a higher limit.
If you love to travel, be sure to consider which prepaid credit cards are suited best for travel and international payment.
For instance, it’s possible to find a Canadian prepaid credit card that allows you to load multiple currencies onto the cards. These funds can then be used when making purchases abroad or online. Purchases will be paid for using the currency that the payment is in, as long as that currency has been loaded onto the card. This allows you to save on currency conversion fees.
Foreign currencies that are offered on prepaid credit cards in Canada include:
Prepaid credit cards that cater to travel may also have locked-in exchange rates. This ensures you get the best bang for your buck, especially if you load your card when exchange rates are low.
Travel-centric prepaid credit cards can also provide benefits to those who often shop on overseas websites. Preloading your card with various currencies when rates are low can help curb high exchange rates.
Free international ATM transactions is another perk to look out for when choosing a prepaid credit card. This benefit allows you to save money on ATM fees while travelling.
If you don’t qualify for a conventional travel credit card, consider a prepaid credit card. Prepaid credit cards that offer travel benefits provide a great alternative to travel credit cards with no foreign transaction fees.
Secured credit cards are similar to prepaid credit cards. Like prepaid credit cards, secured credit cards are more accessible to individuals with poor credit. However, unlike prepaid credit cards, secured credit cards can be used to build or rebuild credit.
With a secured credit card, you must provide an initial deposit equal to your credit limit. With this single deposit, you can continue spending up to your maximum credit amount.
Interest fees and fees for missed payments are a downside to secured credit cards. Prepaid credit cards, on the other hand, do not charge these fees. Therefore, depending on what you intend to use your credit card for, a prepaid card may be your best option.
Emma is responsible for all content on Creditcards360.ca. She has a college degree in economics and a keen interest in personal finance. Get in touch with her by email.Last updated Mar 2, 2021