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Key takeaways
- If you are just starting your credit journey, getting a secured credit card is often a good place to begin.
- You should keep your secured credit card for as long as it’s useful to you in building credit, which may include even after you’ve moved on to other credit cards.
- Even if you are able to upgrade to an unsecured credit card after establishing a good credit history, you should think twice before closing your secured card account.
Starting a credit journey looks different for everyone. Perhaps you started in college by opening a student card or another kind of card designed for those with no credit history. Perhaps you took a bigger leap and started by getting a small loan.
Another popular starting point is to open a secured credit card. As with any first line of credit, a secured credit card will set the precedent for the length of your credit history — an important component of your credit score.
Secured credit cards work similarly to standard credit cards but require a security deposit to open a line of credit and often don’t require a good credit score. But if you’ve had one for a while and aren’t sure how long you should keep a secured card open for, then read on, as we’ll unpack when it’s time to move on — or not.
How long should you keep a secured card?
As your credit score increases over time with responsible use of your secured card, you may be considering upgrading to an unsecured card with more rewards and no deposit required. However, even if you do outgrow your secured card and stop using it, there’s still value in keeping the card open. That’s because the age of your credit accounts matters when determining your credit score. The longer your credit history exists, the better your credit score will be.
Therefore, if your secured card is the oldest existing credit line you have, it may, at least temporarily, ding your credit score to close it. That said, some secured cards have extra fees in addition to their initial deposits. If you have to pay annual fees or other maintenance fees on your secured card, it may be better to close it to cut down on any unnecessary expenses.
My very first credit card was the Capital One Platinum Secured Credit Card, which I opened with a $200 deposit. For over a year, I worked diligently to build my credit score until it was high enough — and I felt confident enough — to apply for an unsecured rewards card. However, I still have my secured card today. It has no annual fee, so I charge a small bill and pay it off with autopay every month to add to my credit history.
— Madison Hoehn, Bankrate credit cards editor
How secured cards affect your credit score
As with any credit card, opening a secured card will require an application and an approval process. Once you apply, your credit score may dip temporarily as a result of a hard inquiry on your credit report. Despite this small decline, your score will increase over time as long as you use your secured credit card responsibly.
Responsible card use includes:
Consistent, responsible practices could get you an upgrade to an unsecured credit card in no time.
How does closing a secured credit card hurt your credit score?
If you feel that your secured credit card is no longer of use, and you’re considering closing it, be warned that your credit score may take a temporary hit. Your credit score is comprised of several factors, including:
- Payment history
- Amounts owed
- Length of credit history
- New credit
Length of credit history accounts for 10 percent of your credit score, so if your secured card is your oldest, closing it may reduce your average credit history, likely leading to a slight credit score drop.
Think twice before closing a secured credit card account
People with limited credit history could end up in a bind when it comes to deciding whether to keep a secured credit card open. Closing a secured card too early, especially if it’s your first line of credit, could ding your credit score.
If your secured credit card doesn’t have an annual fee, and you can afford to use it for a small, recurring charge or leave it in a secure drawer, then you may want to consider keeping it open instead.
Another alternative is to upgrade to an unsecured card with the same issuer. Upgrading to the unsecured version of your secured credit card will get you the extra benefits that come with an unsecured card and return your deposit to you, but you will keep the same account. This prevents another hard inquiry on your report and doesn’t affect your credit history length.
When to upgrade to an unsecured credit card
You can start considering an upgrade to an unsecured credit card once you’ve achieved a fair or good credit score. Improving your credit score could take up to a year or more, depending on your personal spending habits. The best way to work yourself up to an upgrade is to pay your bills on time and in full. Keep an eye on your credit report, and be sure to dispute any errors that could derail your credit-building efforts.
Keep in mind:
Many secured card issuers will automatically consider your account for an unsecured card upgrade after a certain period of consistent responsible activity with the secured card.
The bottom line
Your secured credit card is a tool that you can make work for you if you leverage it in the right way. Use your secured credit card responsibly over time to build up your credit score. Once you’ve reached a fair to good score, look into upgrade options offered by the same issuer if you can. Finally, consider keeping your secured credit card open, even if you don’t use it, to boost your credit history and credit utilization ratio.
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