After using my Peoples Trust Secured MasterCard for over two years now, I felt it was time for a review. If you’ve been an avid reader of this blog, you know that I highly recommend getting at least one secured credit card as soon as possible, after you are discharged from your bankruptcy.
Why get a secured credit card?
Because virtually everyone is accepted and they report to both credit bureaus in Canada: Equifax and TransUnion. By using the card responsibly and paying it on time every month, you will be establishing NEW credit AFTER your bankruptcy discharge. This is cruicial, because virtually all lenders will want to see how you manage credit after being discharged from bankruptcy. They may call it “newly established credit” and will want to see at least one year’s use. Many lenders will actually want to see two years use of new credit after bankruptcy.
And you may have guessed that obtaining new credit with a nice, fresh bankruptcy on your credit report is not going to help you get approved for too many forms of credit. Or for that matter, even if it’s been a few years since you were discharged, as long as there’s a bankruptcy on your credit report, very few lenders will want to work with you. Short of some “buy here pay here” used car lots (which I do NOT recommend for many reasons), there is not much hope you will get any new credit. You need credit to get credit. It’s the classic “Catch 22” situation.
However, after responsibly using a secured credit card for at least a year (two years is better, and in some cases required), you might be able to obtain some semi-mainstream financing, such a car loan that’s not from a sub-prime lender, or an after-bankruptcy mortgage on a home. Without some newly established credit after discharge, there are fewer, and more pricey choices.
How the Peoples Trust Secured MasterCard works
The Peoples Trust MasterCard (formerly called Horizon Plus) is a secured credit card. This means that in order to get a credit limit, you must send in an amount of money equal to the credit limit you wish to have. The minimum credit limit is $500. You can increase your credit limit in $100 increments. All deposits are held in a GIC for you. According to the Peoples Trust website, the maximum credit limit on their secured MasterCard is $25,000. The money you send in is held as collateral and you do not get it back until you pay off all charges on account, bringing it to a zero balance, and request to close your account. Unlike some American secured credit cards, this one cannot be converted into an unsecured credit card.
Who is an ideal customer for a secured credit card?
A secured credit card is ideal for people re-establishing credit after bankruptcy since there is little to no credit available elsewhere. It’s also great for people who have NO credit history, such as teens (18 and older) and young adults who have never obtained any credit, and who may otherwise not qualify for other credit without a cosigner. And new Canadian residents can also benefit from a secured credit card, because, although they may have had an immaculate credit rating in their previous country of residence, the credit reports are not transferrable. Most lenders will want to see newly established Canadian credit.
How does the Peoples Trust secured credit show up on the Equifax and TransUnion Canada credit reports?
The best part is, when your Peoples Trust MasterCard reports to your credit reports, it reports just like any other credit card! There’s no special reporting style or mention of it being secured. So, payments, balances, credit limit and the date the account was established all get reported. And your FICO credit score will be impacted by this as well. If you make your payments on time, have a decent debt ratio (not maxing out your credit limit) and continue using the card responsibly, your FICO score should go up, just like with any other form of credit. And if you abuse it, make late payments and/or max out your credit limit, your FICO score will go down, just like with a secured credit card.
Many lenders may recognize the name of the card and seeing your bankruptcy still on the credit report, may correctly assume that it’s a secured credit card. Currently, Peoples Trust appears to only offer secured and prepaid cards. I just checked my Equifax and TransUnion credit reports, and there is NOTHING identifying them as secured. So, if you don’t tell anyone, nobody needs to know it’s a secured card if they’re none the wiser.
Prepaid vs Secured Credit Cards
A quick reminder about prepaid cards – do NOT use them! They do not report to your credit report, which defeats much of the purpose of getting a credit card! It may solve the issue of needing to pay for purchases or bills online or by phone, but it will not report to your credit report. So make sure you get a secured (not prepaid) credit card. Don’t make the mistake I did, getting a Titanium prepaid card from MoneyMart (InstaChèque in Québec). I got one of those cards and didn’t realize I was cheating myself out of rebuilding my credit since the prepaid card did not report to my credit reports. If you’re going to use a credit card, you might as well use a secured card so you get the credit rebuilding benefit from it.
Available across Canada
Peoples Trust is available across Canada to all Canadian residents, even in Québec (unlike the HomeTrust Visa secured credit card, more on that in a future blog post). This was important to me, because I was living in Montréal at the time, and, as with many things, other cards were not available in “la belle province.”
You can have the application form for a secured credit card and your deposit ready to mail the day you receive your certificate of discharge. You are not permitted to get any form of credit, even secured, while you are still in undischarged status. I believe I got my Peoples Trust Secured Credit Card within one month of mailing the application form and deposit.
Online and Telephone Support
I have used my Peoples Trust secured credit card for automated bill payments, online purchases and purchases in retail stores. It’s worked every time, providing I had sufficient credit available. Monthly statements are mailed out, but you also have instant access to your account online where you can view such things as recent transactions and available credit. Interestingly, in this day and age of high security, Peoples Trust has not come out with a chip card. My HomeTrust secured Visa card has one (I’ll be reviewing that card soon as well).
You can see quite a lot of information about your card, charges and past monthly statements online, anytime you like. But if you don’t want to view your account online, or would just prefer to speak to a real, live person, you can call Peoples Trust by phone. Agents are available from 9:00 am to 6:00 pm Eastern time. Those hours seem behind the times, given that most places offer 24 hour phone support. But, when you’re recovering from bankruptcy and there are few choices, you take what’s available.
They do, however, have 24 hour phone support to report a lost or stolen card. I had to call for that in November when I thought my wallet had been stolen. They were very good about cancelling the card quickly and sending me a new one at no charge. As it happens, my wallet was found a few days later, but the old card could not be reactivated, so I had to wait for the new one to arrive.
Peoples Trust is located in Vancouver, BC. And for a while, I believe they were taking their own phone calls. Now I think it’s forwarded to a call centre in the US. Not that I call often, but the few times I have, I noticed there were no more Canadian sounding people. One time I got an agent with a heavy Chicago accent, and another time one with a New York Long Island accent. It would have been nice to keep it all Canadian, but these days, a lot of businesses are outsourcing.
It looks good to have a credit card in good standing on your credit report
Each month I keep making my payments on time (using online banking), and Peoples Trust keeps reporting to my Equifax and TransUnion credit reports. At the moment, I’m carrying a balance, which is likely the reason my FICO score is a bit lower than usual. Once I pay off the balance, I’m sure my score will go back up. At least I’m current, in good standing and it’s been reporting to my credit report for over two years. By the time my bankruptcy falls off my credit reports, this card will have been reporting to my credit report for about four years. So when I apply for some credit, like a mortgage or a car loan at that time, even if I had no other credit reporting, at least I’d have my Peoples Trust MasterCard reporting for the last four years. Aged accounts are better than new accounts. The older the better. If you’ve been through a bankruptcy, you won’t have any of your old cards anymore. That’s why it’s so important to get that secured card as soon as possible once you are discharged.
Overpayments are not allowed
It’s interesting to note that you cannot overpay your credit limit. I tried that once, hoping I could charge a large purchase on my Peoples Trust Secured MasterCard, that exceeded my credit limit. Unfortunately, and unlike with most secured credit cards, the overpayment was not applied to make a higher credit limit. Instead, it remained in waiting until I charged some purchases. For example, when I first got my card, I started with a $500 credit limit. I overpaid by $300 one month, thinking I would get an $800 credit limit. It didn’t work that way. I continued to have a $500 credit limit. Ironically, as I charged purchases, they came off the $300 overpayment, until it was used up and then it showed as a balance. For example, once I had charged $400 worth of purchases, my balance showed as $100 (since it took from the $300 overpayment first). If I had attempted to make a $750 purchase, I was told it would not go through since my credit limit was $500 and my account was at a zero balance, and in fact way paid $300 beyond that.
Raising your credit limit
I’ve since sent in a few more deposits and have raised my credit limit to a much more reasonable $2000. Now my card is not likely to get maxed out as easily, and it helps keep my debt ratio down. It looks better to have $400 owing on a card with a $2000 limit than on one with a $500 limit. It’s not as close to being maxed out, and that matters on your credit reports. But if all you can afford to start with is the minimum $500, then do it. It’s better than nothing and you’ll start the process of rebuilding your credit as it reports to your credit profile. Just don’t charge too much on it, and strive to increase it to at least $1000 which looks, and is, more realistic. And if you’re a high income earner, you can have a higher credit limit. But keep it in line with your earnings. Having too much credit available with a lower income can work against you.
Beware of the dreaded “Over the Limit” charge
Overall, I’ve been very happy with the card. One of my few complaints about it is the rather high “over the limit” charge of $29. One month, I had charged up a lot of purchases. My credit limit was $2000, as it still is now. I had a balance close to my limit, but not quite there yet. Then my statement got printed, and of course, they add the interest charge and the $595 monthly fee. As it happened, the interest charge put my balance over the limit by about $10 or $15. I don’t recall the exact amount. I got a nasty email telling me I had to immediately make a payment to bring my account below my credit limit. And I did that, promptly. Then I noticed I was also charged a $29 “over the limit” fee. I grumbled to myself, and paid it.
Then a few months later, I once again needed to make several charges on my card which brought it close to the balance, but this time I thought I was smarter. I made sure to leave enough available credit for the interest charge to go on, and not push me over my $2000 credit limit. Well, I underestimated by about $2. And yep, you guessed it, I got a nasty email to pay my balance down immediately, and they slapped me with another $20 over-the-limit fee. I was really upset about that and actually called them about it. I told them I paid their $29 over-the-limit fee the last time, because it was the first time that happened, and due to the interest charges, it pushed me over the limit by about $15. But this time, I purposely made a special effort to leave enough room for the interest charge.
My fault for miscalculating, but I told them it was a bit excessive to charge me $29 for being less than $2 over the limit. And it wasn’t even due to me making one purchase too many that pushed it over the limit (since it likely would have been declined anyways). It was due to their interest charges, so they got to charge me about $30 in interest, which put me $2 over the limit, then slapped me with a $29 overage fee, which was due to their interest charges! Luckily I got a nice agent who reversed the $29 over-the-limit fee as a one-time courtesy. Now I make sure there’s LOTS of available credit on my card. A good reason not to charge too much on your card and to make sure you make extra payments mid-billing cycle if you do, to bring down the balance. Don’t pay it in full before the statement is printed, or it will always show a zero balance, and if you have a card reporting to the credit bureau each month with a zero balance, it will look like you are not using credit. This will not help rebuild your credit – so use your cards, and use them wisely.
You might be wondering what kind of interest rate Peoples Trust charges. Here’s the most current information, from their website, as of the day I am publishing this blog post:
The interest rate is similar to conventional unsecured cards at 19.50% on outstanding balances that originate as a result of a purchase and 24.50% on cash advance balances. There is no interest charged on balances originating from purchases if the amount is paid in full by the statement due date, however, interest is charged on cash advances from the day of the advance to the date that the balance is paid in full. An account in arrears may have the interest rate increased to 24.50% until the past due balance amount is paid in full.
There’s also a monthly charge of $5.95 added to your statement each month.
Conclusion – recommended or not?
So would I recommend the Peoples Trust secured MasterCard? Yes, there’s no card is perfect, but this one is pretty darned close to it. You don’t have many choices for credit when you have a bankruptcy showing on your credit report, so take advantage of this card to make your life easier and rebuild your credit. It’s pretty hard to live in today’s modern society without a credit card, so skip the prepaid cards and get this one. You can get more information directly from them at the Peoples Trust secured Mastercard website.