Navigating the world without payment cards these days can be a hassle. No online shopping, always needing cash, and if that cash gets stolen, it’s gone for good. Cards can solve many of these problems, but if you’re not ready to jump into credit cards, you’re not alone. Luckily, there are simpler options—debit, prepaid, and secured cards—that can help you get comfortable with using plastic.
1. Debit Cards: A Simple and Reliable Option
“Debit is the go-to solution,” says Brian McCabe, vice president of core deposits and payments at Scotiabank. He highlights that Canada has one of the best debit platforms worldwide through Interac, known for its wide acceptance, ease of use, and innovations like Interac Flash (contactless payments) and mobile wallet integration.
In the past, the downside of debit was limited acceptance outside Canada or online. Thankfully, Visa and MasterCard now offer debit cards that work wherever Visa or MasterCard is accepted, both online and internationally. When used in Canadian stores, they process as Interac transactions, but abroad or online, they process as Visa or MasterCard debits—all while taking funds directly from your bank account.
Debit cards share the same protections against fraud as credit cards, as long as you follow safety guidelines like keeping your PIN secure. But being debit-only has some drawbacks. McCabe points out that since debit transactions pull directly from your bank account, overspending could leave you short for essentials like rent or groceries. Setting up alerts for low balances can help manage this risk.
Another limitation is that debit cards don’t offer purchase protections like price matching, and most importantly, they don’t help you build credit.
2. Reloadable Prepaid Cards: Controlled Spending Made Easy
If you’re looking for the convenience of plastic without overspending, a reloadable prepaid card could be the solution. Unlike gift cards, which have a set value and are discarded after use, reloadable prepaid cards let you load funds onto them repeatedly. You can use them anywhere Visa or MasterCard is accepted, making them a handy option for online and in-person purchases.
McCabe notes that these cards are ideal for people on strict budgets. By loading only a set amount of money each month, users can control their spending and avoid overdrawing their accounts. They’re also a great option for parents sending money to their kids at school or for nannies handling expenses like gas or meals for children.
Additionally, these cards provide a secure way to store payment info online for faster checkouts. And because they’re registered, they come with the same protections as credit cards, offering zero liability in case of fraud.
However, be mindful of fees. For example, Scotiabank charges a one-time purchase fee and an annual fee of $10 for its reloadable cards. Just like debit cards, prepaid cards won’t help you build credit, and not all banks offer them.
3. Secured Credit Cards: Building or Rebuilding Credit
If you’re aiming to build or rebuild your credit but don’t qualify for a traditional credit card, a secured credit card could be a smart move. With these cards, you make a deposit that acts as collateral, and your credit limit typically matches that deposit.
Secured cards work just like regular credit cards. You use them to make purchases, receive a bill, and pay it off by the due date. The key advantage is that your payments are reported to credit bureaus, helping you establish or repair your credit history.
“The benefits of a secured card are essentially the same as with a traditional credit card,” says Glenn DeSouza, vice president of retail cards at RBC. You can make purchases in-store, online, or via mobile, earn rewards, and enjoy fraud protection.
A secured card is a good option for those recovering from financial issues like bankruptcy. By using the card responsibly, you can demonstrate your ability to manage debt and improve your credit score over time. After about a year of solid credit history, you can typically upgrade to an unsecured card.
However, not all issuers offer secured cards, and qualification criteria vary. For example, RBC requires applicants to have credit in good standing, meaning if you’re still dealing with a recent bankruptcy or unresolved credit issues, you might not qualify.
The Road Ahead: From Starter Plastic to Full-Fledged Credit
Getting started with debit, prepaid, or secured cards can be a great way to ease into using plastic. Over time, as your needs evolve, you can transition to a regular credit card—and maybe even an elite one with rewards and perks if your credit score is high enough.
Think of these card options as stepping stones. Pick the one that fits your current situation, and upgrade as your financial needs and habits change.
