How Long Should I Keep a Secured Credit Card?

A young woman lays down on the couch while using her laptop and smiling at her credit card.

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A secured credit card can be a great option for building or rebuilding your credit. There's no set amount of time you'll have to hold a secured card before your credit score improves and you're able to get an unsecured card—if you choose to. How long you keep a secured credit card depends on how you manage the account, whether you're enjoying the card's features and, possibly, whether your card issuer offers to upgrade you to an unsecured card. Here's what you need to know.

How Long Does It Take to Build Credit With a Secured Card?

A secured credit card can help you build credit if you have a limited credit history or a low credit score. Either of those factors may make it difficult to qualify for a standard, unsecured credit card. When you apply for a secured card, you make a deposit to guarantee your credit line. This lowers the lender's risk, because they can use your deposit to cover what you owe if you're unable to make payments.

You use a secured card the same way you do an unsecured card, purchasing goods and services on the account and making payments each month. If you're applying for a secured card, check to see that the card issuer reports your payment activity to one or more of the consumer credit bureaus (Experian, TransUnion and Equifax). Lenders will use both your credit report and credit score to evaluate your future credit and loan applications. Payment history is the most important factor in your credit score, so having a history of on-time payments on your secured card can help you improve your credit score and secure future loans or credit cards.

Developing a strong credit history with your secured card can help you qualify for unsecured credit cards that may have higher credit limits as well as more features and benefits. Opening an account with a higher credit limit can also improve your credit utilization, as long as you keep your balance low. That's helpful, because credit utilization is one of the biggest factors in your credit scores.

Even with a secured card, there's really no quick fix to building or repairing credit. The goal with a secured card is to establish a record of on-time payments and keep your balance low. As you do so, you're likely to see your credit improve.

Whatever your credit goals are—and they look different for everyone—one of the best things you can do is monitor your report and score regularly. Experian's free credit monitoring service gives you access to your Experian report and FICO® Score so you can see where you stand. You'll also get to see the top factors influencing your score, which will give you insights into where you can improve.

Should I Close a Secured Credit Card After Building Credit?

Once you've raised your credit score, your instinct might be to close the secured credit card account. After all, it served its purpose so it's time to move on, right? Not so fast.
Some secured credit cards may increase your credit line after a certain amount of time, potentially solving one issue with your card. Other issuers may offer an automatic upgrade to an unsecured credit card if you make a certain number of payments on time. In this case, your deposit will be refunded to you and you'll be able to start using your new, unsecured card.

If that hasn't happened and you're eager to transition to an unsecured card, you could try applying for an unsecured card to see if you can qualify. If you can't, you may want to hang on to the secured card and continue to work on improving your credit score, then apply for a different card down the road.

Your total available credit also factors into your score as it relates to your credit utilization, so you may want to keep the credit line open to hold on to that available credit, even if you end up opening an unsecured account.

You'll also want to review your account balance and the terms and fees. If your secured credit card doesn't have an annual fee, and you're not incurring late fees on overdue payments, then it doesn't cost you anything to keep the card. But if you are paying an annual fee, you may want to consider a different card that doesn't charge a fee.

Look, too, at how much money is tied up in the account. Do you still owe several hundred dollars on it? If so, you'll need to pay that off before you can close the card.

You'll likely benefit from keeping the account open if you plan to apply for a large loan in the near future as well. Making moves that could significantly affect your score right before applying can make lenders wary.

How to Properly Close a Secured Card

When you're ready to move on from a secured credit card, you don't necessarily need to look for a new lender. Find out whether you can upgrade to an unsecured account with your current issuer based on your usage history. You can boost your chances of approval by keeping your balance low, paying your bills on time and being able to show proof of steady income.

If you decide to apply with different lenders, avoid applying for too many new accounts at once. Every time you submit an application, lenders will check your credit using a hard inquiry, which stays on your credit history for two years and could slightly lower your credit score temporarily.

The better move is to research some cards and apply for one or two that align with your credit background and needs. For example, if you've improved your credit so it's now in the "fair credit" range (a FICO® Score of 580 to 669), consider card options targeted to consumers in this range. If you're not sure where to start, Experian CreditMatch™ can suggest cards based on your circumstances, and it won't affect your credit score.

When you're ready to close a secured credit card, you'll first need to make sure your balance is fully paid. Then you can contact the issuer directly to request that they close your account.

A secured credit card is a stepping stone toward bigger financial opportunities. As long as you make the most of the account by using it to develop and demonstrate sound credit habits, it can help you expand your borrowing options.