How Long Should I Keep Using a Secured Credit Card?

Trisha Miller
secured credit card

You’ve started making some improvements to your spending habits. You’ve been using your secured credit card for a while, but you want to know when you can move on to larger investments, or a traditional credit card with better rewards.

Although some services, like credit repair, can drastically improve your credit score in a short amount of time, building a solid foundation of good spending habits takes a lot of time no matter who you are. Those who are dedicated to a solid credit score practice good credit habits over a lifetime. You’ll need to be disciplined about investing that time into improving your credit score and keeping it that way.

Credit histories and scores are updated frequently with new information, but one piece of good information does not change your entire score on its own. Below, we will take a look at when you’ll start to see improvements and when it might be time to move on from a secured credit card.

Table of Contents

When Should I Close My Secured Credit Card?

You should only close a secured credit card account if you absolutely have to. In the best-case scenario, you improve your credit score by using the secured card responsibly.

Your good credit allows you to obtain unsecured credit cards, lines of credit, and loans. Then, you can safely close your secured card without worrying about credit score damage

There are certain other scenarios where it could make sense to close your secured credit card. If any of the following scenarios pertain to you, it may make sense to go forward with closing your secured credit card.

  • If you have significant money tied up in your secured credit card: Secured credit cards require an initial deposit to open. When you close your card, you generally receive that money back. If you have a significant amount of money tied up in your secured credit card, it could make sense to close your account;
  • If your secured credit card has high fees: Some secured credit cards may require an annual fee in addition to your deposit. Since secured credit cards do not have rewards in most cases, it may not make sense to keep paying annual fees to keep your card open. If you cannot afford the fees, close the card;
  • If your card issuer is willing to upgrade your card: Card issuers want to keep customers as long as possible. Talk to your card issuer to see if they are willing to upgrade your current card to a new unsecured credit card;
  • If you have multiple other credit cards: Having multiple credit cards is not wrong, but it can be a lot to manage. If you have multiple other credit cards with better terms, rates, and rewards, it may make sense to close out your secured credit card;
  • If you want to take advantage of credit card rewards: When you were first getting started with your secured credit card, you may not have been able to get approved for a credit card with rewards. If you can get approved for a credit card with rewards, it may be time to build credit and earn rewards with a new card;
  • If your credit score has significantly improved: If your goal for obtaining a secured credit was to increase your credit score, and you have achieved this, it may be an appropriate time to move on from your card;
  • If you need a higher credit limit: If you want or need a higher credit limit, it may make better sense to close out your secured credit card and apply for a new credit card with a higher credit limit;
  • If there is an authorized user on the account who is spending irresponsibly: Some people choose to trust someone else as an authorized user with their credit card. If an authorized user isn’t using your credit card wisely, you may want to close the account to avoid potential damage.

In some cases, closing a credit card can hurt your credit score. There are a number of things that go into your credit score and closing your credit card shortens your credit history, minimizes your credit mix, and increases your credit utilization rate. The amount your credit score is affected depends on:

  • Your credit history: A long credit history has a positive impact on your credit history. The longer you have open lines of credit being used properly, the better;
  • Your credit utilization: Your credit utilization is the amount of credit you use versus the credit you have available. When you close a card, you can potentially eliminate your credit utilization entirely, or it may fluctuate to an undesirable, high ratio if you have any other revolving debt;
  • The number of cards you have: If you do not have any other cards, you would lose all of the credit that was available to you — decreasing your credit history and utilization. If you only have one credit card, you should apply for a new one prior to closing your secured card or you could damage your score.

If you choose to close out your credit card, be sure that you have a valid reason for doing so and that you take the time to close the card properly.

How to Close a Secured Credit Card

If you have decided that it is time to close your secured credit card, there are certain things to keep in mind:

  1. Find a replacement card and get approved prior to closing your current card;
  2. Pay off your balance to create a smooth closing process;
  3. Research a variety of cards to determine which replacement is best for your specific credit needs;
  4. Avoid applying for too many new credit cards to avoid negating your credit improvement efforts. When you apply for a credit card, lenders perform a hard inquiry and this can lower your credit score. Hard inquiries stay on your credit report for two years, so apply wisely;
  5. Lastly, contact your card issuer and request for them to close out your account. In some cases, you can do this online, in others, you may need to call the customer service number listed on your card issuer’s site.

When you take all of the precautions above into account when closing your card, you help protect your credit score from decreasing — especially if the secured credit card is your first and only card.

How Fast Does a Secured Credit Card Build Your Credit?

Credit cards (in general) are a good thing to own for your credit’s sake. Using them —  even just for small purchases that you pay off quickly — adds positive information to your credit history. Of course, many other things will also improve your credit score such as paying off other loans or disputing credit report errors.

Keeping your credit utilization ratio low is always a good thing. Limit your credit utilization to around 30% of your credit availability. If you have a credit limit of $300, you should avoid spending more than $100 with your card. If you need to make additional purchases, be sure to pay off your balance first.

Individuals using secured credit cards may be able to see improvements in their scores in just a few short months. Most individuals will see a small improvement in as little as six months — as long as they are being consistent about paying on time and managing poor spending or borrowing habits.

If you’re looking to build your credit score over a short period of time, then you should consider other methods of credit repair in addition to using a secured credit card. Simply using a secured credit card to do all of the heavy lifting will take longer than a combination of credit repair tactics.

With that being said, secured credit cards are good for most individuals with no or limited history, and a low credit score. It’s not that a secured credit card would be inherently “bad” for anyone with a higher credit score, it’s just that someone with good or excellent credit will probably be able to get their hands on a credit card with a higher limit or better rewards.

The primary goal of a secured credit card should be to get your credit into your preferred range. Once you’re in your desired range, you shouldn’t have to use a secured credit card anymore.

How Long Should I Plan to Use a Secured Credit Card?

If you are curious about how long you should use your secured credit card, the simple answer is: as long as it takes to meet the goals you had for utilizing a secured card in the first place.

Once you have established good credit, and you feel like you understand all of the best practices for using credit cards, it could be time to upgrade to a different credit card.

If you feel that adding a credit card with a $2,000 limit is going to be too tempting to max out, then you should stick with the secured credit card. Your goal is to keep the balance low and use it only when you need it.

That said, using a secured credit card for years is okay. Having a secured credit card isn’t a bad thing on its own, but it can provide diminishing returns as far as building positive credit over time.

In the end, some individuals might use a secured credit card simply as a stepping stone towards a more standard card. For many, it could only take six months or so to see the type of improvement they want in order to get approved for a new loan or line of credit. Others might have to do a bit of damage control and it might benefit you to keep the card open for a year or two while you pay off your other loans.

Lastly, some people know that their spending habits are best handled by keeping a secured credit card long term instead of getting a new card with a higher limit, so they might never close it.

By and large, you should aim to do whatever is right for your specific financial situation, your spending habits, and your overall financial goals.

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