Secured credit cards can be perfect for anyone trying to establish or rebuild their credit. But there will come a time when the secured card has served its purpose and you’re ready to move on. While it may be tempting to keep your secured credit card, you probably don’t want to be stuck with a small credit limit and high fees forever. Depending on your situation, it might make sense to close your secured card and graduate to a traditional, unsecured credit card.
A financial advisor can help you establish or rebuild credit to buy a home and reach another financial milestones.
Should You Close Your Secured Credit Card?
If you’re thinking about closing your secured credit card, chances are you’ve improved your credit. But before you close your card, it’s important to assess how that might affect your credit score.
Fifteen percent of your credit score depends on the length of your credit history. Whether closing your secured credit card has an impact on your score depends on the age of your other credit accounts. If your secured credit card account is significantly older than your other accounts, closing it could lower the average age of your accounts and hurt your credit score.
Closing your secured credit may also affect your credit utilization ratio. Secured credit cards usually have low credit lines. But closing the account could lower the amount of available credit you have overall and raise your debt-to-credit ratio. Having a credit utilization ratio above 30% could lower your credit score.
If you believe that closing your secured credit card won’t have a big impact on your credit score, the good news is that the positive credit history that you’ve established with the card can remain on your credit report for as many as 10 years.
Closing Your Secured Credit Card
If you’re ready to close your secured credit card account, you can call the number on the back of the card and ask a representative to close the account. During the conversation, it’s a good idea to make note of who you spoke with and what their instructions were. Just keep in mind that if you’re carrying a balance, it’s best to pay it in full and get rid of your credit card debt before canceling the card.
Also, don’t forget to ask the representative about your security deposit. It’s a good idea to confirm the amount you’ll be getting back and find out how long it will take to receive the deposit. Receiving your security deposit could take between 60 and 120 days. But that may vary depending on your credit card company.
Once you’ve received your deposit, it’s best to throw away your canceled card to avoid using it or having someone steal it.
Canceling your secured credit card and opening a traditional credit card account may be a good idea if you’ve improved your credit score and you want a higher credit line. But before making the switch to an unsecured credit card, it’s important to consider what that’ll do to your credit.
Before closing your card, you may also want to find out whether you can simply ask your credit card issuer to upgrade your secured credit card or transfer your credit line to a new, unsecured card.
Tips for Borrowing Money
- If you’re thinking about borrowing money but aren’t sure how to make your credit work for you, consider speaking with a financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Credit cards come in all forms with different benefits and different costs. Consider using our tool to help you find the right credit card for your situation.
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