How to Know When It’s Time to Ditch a Starter Credit Card

Don't get too comfortable with your first card — once it's done its job, it's time to move on.

Erin HurdJul 12, 2021
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As far as first credit card relationships go, it’s been good. Your starter card has taught you to be responsible and to think differently about your financial priorities, and it's taught you that time (and bills) wait for no one.

But eventually, your first credit card relationship needs to evolve. Breaking up with the card and starting a new, more mature credit relationship doesn’t have to be scary.

Here’s how to know when it’s time to ditch your starter credit card.

When your credit scores have been lifted

When you’re just starting out with credit, you learn quickly that it's a Catch-22: generally, you need credit in order to get credit. If you don’t have a credit history, it can be hard to get approved for many credit cards.

As a result, most people take one of two starter credit card paths:

  • Secured credit cards: For many credit newcomers, a secured credit card can be an excellent tool for building credit. You pay an upfront deposit, usually $200 to $300, and get it back when you close the account in good standing. In turn, the credit limit on your secured credit card is typically equal to the amount of your deposit.

  • Unsecured credit cards: There are cards out there that are specifically geared toward people with limited or no credit. Since they don’t require a deposit, they may seem more appealing. But these cards are often laced with steep fees that can take a real bite out of your budget when you’re trying to build credit, and they often have low limits as well.

Nerdy tip: Having a low credit limit doesn’t just hurt your ability to make a large purchase; it can also hurt your scores. The percentage of available credit you use is called credit utilization ratio, and it’s a big factor in your credit scores. If you have a balance that’s more than 30% of your available credit, it can have a negative impact.

If you’ve been using a starter credit card responsibly and paying the monthly bills when they’re due, over time you’ll see a positive change in your credit scores. Once your FICO credit score has crept into the "fair" range, typically between 630 and 689, you’ll unlock the ability to be considered for some more appealing card options. Once you cross into the "good" range, generally 690-719, the choices expand even further.

Financial coach and author Shanté Nicole Harris recommends beginners "start with a secured card, but only use it as a steppingstone path to eventually getting the unsecured credit card you really want with no deposit or high fees."

Some secured credit card issuers will automatically upgrade your card to an unsecured version and return your deposit, but some won’t. Contact your card issuer to inquire about your options.

If your starter card isn’t really yours

Becoming an authorized user on someone else’s credit account is a great way to get started building credit. When added as an authorized user, you piggyback off the other person’s good credit habits and your credit scores benefit.

This is a popular and effective strategy for those new to credit, so authorized user cards often function as starter credit cards.

But the score-altering powers of an authorized user credit card are limited. The primary cardholder — not the authorized user — is responsible for paying the bills. As such, being an authorized user on a credit card will probably give you a nice bump, but it may not have a huge impact on your credit scores.

Once you’ve achieved better credit scores, it’s time to stop tagging along. Instead, open your own credit card account. You’ll help your credit scores even more with your own card, provided you pay the bills on time and keep balances low.

“When you’ve been added as an authorized user, it’s like getting training wheels to a credit card," says Winnie Sun, managing director and founding partner at Sun Group Wealth Partners. "The primary card holder can help support you for the time being. Eventually, you’ll want to get your own credit card and can always easily have yourself removed as an authorized user on someone else’s card."

When your card is not as rewarding as it could be

When celebrity-studded TV commercials tout eye-popping credit card sign-up bonuses and luxurious perks, there’s something they don’t tell you: unless you have good or excellent credit, you probably won’t be approved. The reality is that, usually, the most rewarding credit cards aren't designed for beginners.

Rewards are becoming more common for some starter cards, but not all cards offer them. There’s a good chance that your starter credit card doesn’t earn any rewards at all, and if it does, there are probably better options.

If your starter card has gotten your credit scores high enough, usually to at least 690, you could qualify for a more rewarding card that earns:

  • Cash back: It’s not hard to find a card that earns at least 1.5% cash back on everyday purchases, or as much as 5% on rotating categories, for no annual fee.

  • Travel rewards: A slew of travel cards reserved for those with higher credit scores can offer airline miles, hotel night certificates, travel credits and more.

  • Cryptocurrency: A new crop of cards offers the ability to get in on the cryptocurrency craze with rewards.

Derrick Dye, who lives in Baltimore, moved from a card that looked cool, complete with his favorite team’s logo, but didn’t earn any notable rewards to a travel rewards credit card.

“After seeing my credit scores rise, I decided to apply for a credit card that offered rewards,” Dye says. “With my new travel rewards card, I quickly earned enough points to take a vacation that I probably couldn’t have afforded before.”

Sun notes that closing your starter card isn’t always the best move. If you can keep the credit line open but upgrade to a more rewarding card, it can be better for your credit history because it helps boost the average age of your accounts.

"If there isn’t an annual fee, keep it," she says. "Take it out once a year at least, use the card, pay it off, and keep that credit history going. This is an important part of keeping a strong credit score — a healthy and longer credit history."

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