Low income credit cards

If your income is low, various credit cards are available for you.

By   |   Verified by Yvonne Taylor   |   Updated 26th August 2022

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Comparing low income credit cards

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On website

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Balance transfer

N/A

Purchase rate

17.99% p.a. ongoing

Annual fee

$12.95 p.a. ongoing

Highlights

  • Low annual fee of $12.95 p.a. (with $3 monthly maintenance fee).
  • Get a credit limit starting at $200 up to $10,000. Secure your credit limit with a required deposit then build your credit by making the same everyday purchase you already make.
  • No credit check is required.

Pros

  • No credit check is required.
  • The minimum deposit starts at $200.
  • Comes with an interest-free period of 21 days.

Cons

  • There is no rewards program on this card.

Having a low income shouldn’t stop you from getting a credit card. In fact, more and more credit cards for low income households are becoming obtainable in Canada, and there are a ton of options out there. Some banks make it easy for people with low income to get credit cards. In fact, there are even credit cards for those with no income at all, allowing them to make necessary purchases. However, it’s important to know that income is never the only factor in qualifying for a credit card. Your credit history and credit score play an important part too.

How to know if you're a low income earner

According to the Canadian government's official poverty line – the Market Basket Measure (MBM) – a low household income lies somewhere between $37,000 p.a. and $50,000 p.a., depending on where you live.

But how does this translate into income requirements for credit cards? Some credit cards, such as American Express cards, don't have a specified income requirement, while others do, but the eligibility may be as low as $12,000 p.a. in some cases. In general terms, if your income is below $60,000 p.a., you'll probably be best served by a low income credit card. But you'll still have plenty of choices, including cards with rewards and complimentary benefits. However, low incomes will be generally ineligible for higher level cards with more attractive sign up bonuses like points and elevated cash back rates.

Why your income amount matters

There are three reasons why credit card issuers look at your income when you apply. The first is to make sure that you can afford to make repayments. The second is to help set your initial credit limit. And the third is to make sure that they make the maximum profit, since they're more likely to approve applications for premium cards from potential big spenders who will earn them plenty of merchant fees.

Why your income source mostly doesn't matter

While it is technically possible to get a credit card with no income, you'll probably stand a better chance of being approved if you do have an income source, no matter what it is. Your income could come from investments, a retirement fund, alimony, unemployment or disability benefits, or part-time or casual work. The card issuer is more interested in whether you can meet your repayment obligations than in how you receive your income.

Proving your income

The following ways of proving your income when applying for a credit card should be acceptable, depending on your income source:

  • Pay stubs
  • T4 statement of employment income
  • T4E statement of unemployment benefit income
  • T4A (P) statement of pension plan benefit (retirement, disability, etc.)
  • A copy of your annual income tax return, and possibly a Notice of Assessment
  • Proof of income statement (option C print) from the CRA

Alternatives to low income credit cards

If your income is so low that you are ineligible for a credit card, you still have options:

  • Debit card. Debit cards are the most popular alternative to use because they let you spend only what you have and don’t come with an annual fee. They are linked directly to your bank account, so you never have to worry about being in debt because you're spending money you already have.
  • Prepaid card. These can be used for purchases in the same way as credit and debit cards, but you preload them with a fixed amount of your own cash. When you have spent all the cash, you may have an option to reload more cash on to the same card. Like a debit card, there are no annual fees to pay, and no risk of getting over your head in debt.
  • Secured card. Most credit card are unsecured, in that the card issuer does not require you to put up any collateral to secure the revolving line of credit it is extending to you. But if your income is too low, or your credit history poor or non-existent, you could opt for a secured credit card, where you deposit with the card issuer an amount of cash at least equivalent to the credit limit you are looking for. If you fail to meet your repayment obligations, the card issuer could use your deposit to pay off your card balance.
  • Personal loan. Taking out a personal loan could be cheaper, especially if you can get a good interest rate. However, you need to be sure that you can afford repayments, as well as be aware of late fees, and early repayment that can also incur extra fees.
  • Buy Now Pay Later services. Many companies offer Buy Now Pay Later (BNPL) plans for various purchases such as appliances, furniture, electronics, fashion and services. With this type of plan, you can purchase something you need and then spread the interest-free repayments over a number of weeks to fit your budget. Fees are incurred for late payments. Popular BNPL services include PayBright, Sezzle, Afterpay and Splitit.

Learn about low income credit cards

What is a low income and what are the benefits of having a credit card?

  • FAQs

  • Pros & cons

  • Tips

How can I improve my chances of being approved?

Check your credit rating at one of the Canadian credit bureaus, and then work on improving it by paying down any loans and paying all your bills on time. It's also best if you don’t make too many applications at once, or one after the other, because each application will reduce your credit score slightly and may raise a red flag with the next card issuer. It also assures lenders that you won’t be a high-risk client if you can show them a savings account, or proof of income that demonstrates your financial capability to pay back what you owe.

What is defined as a low income?

For the purposes of credit card applications, low income is usually regarded as earning less than $60,000 annually. But this could be your income as a household (that is, including your spouse's income) rather than as an individual.

What is generally the lowest acceptable income?

You can find comfort in knowing that the lowest income accepted is $12,000 for some cards. But your low income will need to be accompanied by a good credit score.

What proof of income will I need to provide?

It depends on whether your income source is employment or something else. Income from investments or rental property may need a statement from your letting agent, broker or accountant. Otherwise you'll need one or more of:

  • Pay stubs
  • T4, or T4E, or T4A (P) statement of income
  • Your two most recent tax returns and/or Notices of Assessment
  • Proof of income statement (option C print) from the CRA

What should I consider when applying for a credit card if I have a low income?

Compare all your low income credit card options, paying particular attention to the following features:

  • Interest rate. It’s important to look for the lowest APR if you expect to be carrying a balance beyond each payment due date. But the best way to use a credit card is to take full advantage of the interest-free days and grace period, and then repay the balance in full, avoiding interest charges.
  • Annual fee. Annual fees for low income cards may range from $0 to $100. When there is a fee involved, it usually means there are some extra benefits attached, such as cash back, rewards points or airport lounge access. By all means consider a card with benefits, but make sure that you will extract more value from them each year than the cost of the annual fee. Don't pay an annual fee for benefits that you think you may not use.
  • Credit limit range offered. If you have a low income, then your credit limit is also likely to be low. Credit card issuers can only extend credit that the borrower can realistically repay. You may have to start with a low limit, and then request an increase later, based on a pay rise or your good repayment record.

What should I do if my application was declined?

If your application was rejected because your income was too low, there’s no need to panic. Here are some options for you to still have a credit card:

  • Save up for a secured card.These are a popular option because it is safe and affordable. It requires you to make an upfront security deposit, usually for the same amount as the credit limit. This is to protect the issuer from non-payment, but you will get your money refunded if you upgrade to an unsecured card or close the account.
  • Ask for a co-signer. A friend or family member with a good income and credit score can co-sign your application, which means they need to accept the legal responsibility for paying for the account if you don’t.
  • Ask to be an authorized user. This is a convenient way to get yourself a card. As an authorized user on another person’s account (such as your parent's account), you can get a card with your name on it, while the account owner is responsible for making payments. You can work out an arrangement so you can pay them back for any charges you incur. 
  • Look for a card with no income requirement, or a low income requirement. American Express cards in Canada no longer stipulate minimum income requirements. Other cards may have very low income requirements, starting at $12,000. Just because the income requirement is not specified, or is low, doesn't mean that you will be automatically approved, but it's a good start. However, wait at least three months before applying for another card if your first application was rejected. Multiple applications within a short time period will damage your credit score.

What will I need to apply?

  • Proof of income. You will need to show documents that verify that you've had an income for at least two years. This can be pay stubs, tax returns, a statement of state benefit income, a profit and loss report if you're self-employed, or anything that can show you have money coming in.
  • Good credit. If you have a clean credit report, you are much more likely to be approved. It's also a good idea to avoid applying for another card if a previous application was recently declined. Applying too frequently can damage your credit score. Check your free credit report annually, from Equifax or TransUnion.
  • Other eligibility requirements. You will need to have reached the age of majority in your province or territory, and also meet any citizenship, residency or visa criteria specified by the card issuer.

Why do banks need to see my income?

This is simply to determine if you will be able to make payments on time and to ensure that you are not at high risk of defaulting on your account.

Will banks consider any income from casual work?

Yes, as long as you meet their minimum income level and any other eligibility requirements they specify.

It’s an easy way to improve your credit score

Lenders assess your credit card application by looking at your credit history, to see a record of the money you’ve borrowed, and if you were able to pay it back or not. This credit history also determines your credit score, which is a key factor in determining your eligibility. So, getting approved for a credit card when you have a low income, and then using it responsibly by making full timely repayments, is a great way to improve your score in case you need to apply for more credit (such as a home loan) in the future.

It's an expensive way to borrow money

This is where it gets tricky, not just for low-income individuals, but for everyone. Unfortunately, those who don’t pay their debts back on time can accumulate late payment fees and interest charges fast. In addition, many cards come with an annual fee and can even give you a cash advance in exchange for a hefty interest rate which is often even higher than the normal rate for purchases.

More secure to use compared to cash

Cash can vanish in a minute, while credit cards can stay secure even if they’re lost or stolen. Simply let your card issuer know the problem and they can place an immediate hold on your card to prevent any fraudulent purchases, while issuing you with a new card and account number. Card issuers also constantly check your transactions in an effort to detect any suspicious activity by fraudulent users.

Potential to earn points and cashback

As long as you use your credit card regularly, many companies have rewards points schemes that give you airline miles or cash back. Use your card for everyday expenses to get the most out of the rewards. While cards may come with an annual fee, the benefits can outweigh these if you use your card wisely.

You can damage your credit with irresponsible use

Once you've been approved for a card, failing to make minimum monthly repayments, being late with payments or actually defaulting on payments, will all harm your credit score. If you can't promise yourself to use a credit card responsibly, it's best to avoid having one.

You could get yourself into persistent debt

While a new card can give you quick access to more money, overspending is easy and that’s how many people can become buried in debt. It’s best to avoid temptation and stick to only what you can pay back each month, while keeping your eye on the annual fees.

Check the fine print

Before signing anything, make sure you fully understand the terms and conditions of the contract. Having knowledge of the cash back offers, rewards programs, the annual fee and interest rates can save you from any surprises down the road. Knowing how long the interest-free period is, and when to make repayments, will also help you avoid getting into too much debt.

Check your credit rating before submitting your application

Learn the essentials about your credit score and report by getting a free copy from one of Canada's two main credit bureaus, Equifax and TransUnion. Knowing about credit scores and how they can help is a great way to start your application process. Here are just a few factors that affect your credit score: 

  • Payment history. Whether you pay your bills on time, and records of any payment defaults.
  • Total accounts and mix. How many credit accounts you currently have, and whether there is a good mix (e.g. credit card, personal loan, mortgage).
  • Credit utilization. Ideally you should be using no more than 30% of the total credit available to you.

Review your credit report before applying

To make sure that there are no mistakes on your credit report, it’s best for you to review it first. Ensure that it’s free from any errors before applying for a credit card. If you find any errors, ask the reporting agency to fix or remove them. This may improve your score. Remember that you are entitled to a free credit report from either of the credit reporting agencies –Equifax and TransUnion – each year.

Some credit cards might accept income from sources other than employment

While it helps to have a job when applying for a credit card, it's not essential. There are many credit cards prepared to accept income from self-employment, investments, rental property, retirement benefits, disability benefits, child care benefits, and other sources. You may be able to find out which income sources are acceptable on the card's web page, after you click the 'Application' button at Finty but before you start filling out your details.