If I Have Fair Credit, Should I Keep My Secured Credit Card?

You don't have to keep your secured card forever, but you should be aware of the ramifications.
Lindsay Konsko
By Lindsay Konsko 

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After using a secured credit card for a while and building up your credit, you can finally apply for a fair credit credit card. But should you still keep the secured card?

It depends.

A fair credit score ranges from 630 to 698. You probably have fair credit if you’ve had bad debt in the past, if your credit history is on the shorter side or if you’re holding onto some debt. Since there are several options when choosing credit cards for fair credit, you don’t need to hold onto that secured credit card anymore, but you should be aware of potential ramifications.

Secured cards are a great option for people with no credit or bad credit because they enable you to put a deposit down as collateral and begin to build or repair your credit score. However, they also come with high fees and interest rates, so once you’ve established fair credit, you don’t want to hold onto them forever.

Holding onto your secured card will keep your average account age higher than if you close the card. Account age is a good way for lenders to gauge your fiscal experience and responsibility. Closing your secured credit card means your oldest credit line will be closed. You may want to opt to hold onto your secured credit card while you build up history with a new unsecured credit card so closing will have less of an effect on your overall score down the road.

On the other hand, if you don’t close your secured card, you’ll continue paying higher fees that come with the card. Plus, when you close a secured card and “graduate” to an unsecured credit card, you’ll receive your deposit back. Depending on your lender’s policies, you may be able to transfer the credit line of the secured card onto your new unsecured one.

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You’ll also need to consider your total available credit on a new unsecured card, as well your overall costs from fees and interest rate. You’re likely to have a much higher limit on an unsecured card than on a secured one, so closing the card shouldn’t have too much of an impact on your overall available credit

Having fair credit doesn’t mean you have good credit, though, so your options are still more limited. You’ll have fewer options when it comes to credit cards that earn rewards. You also will likely have interest rates that are higher than the interest rates of those who can get approved for cards that require good or excellent credit.

With fair credit you have a better chance of finding a card with no annual fees. No-fee credit cards are good to hold onto because they can continue to lower your debt ratio and lengthen your average account age.

Even with average credit, you certainly shouldn’t close your secured credit card and apply for multiple fair credit credit cards at once. Applying for multiple cards means lenders will check on your credit score each time, which negatively affects your overall score. Opening several brand-new accounts also has the unwanted effect of lowering your average account age. Start by choosing just one, lower interest, no fee credit card and continue building your credit before you open any others.

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