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Can I Change a Secured Credit Card to an Unsecured Card?

April 30, 2014
Credit Cards, Credit Cards for Average or Fair Credit
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Perhaps you had bad credit and needed a credit card. Perhaps it’s time for your first credit card. In either case, you found that the only card you were eligible for was a secured credit card. You put up assets, probably in the form of cash, to provide security for the issuer.

Is there ever going to be a point where you can get your deposit back and change the card to an unsecured one? The answer mostly depends on your own behavior, although it also depends on the issuer.

Do your homework on lender policies

First, before you even apply for a secured card, check out your chosen lender’s policies. Will they even permit you to switch? Each issuer is different. If you can’t find the information online, call a representative. Perhaps you find a secured card you like, or there’s an unsecured version from the same bank that offers rewards you like. You can always apply for the secured card and, when ready, apply for the unsecured one as well. Eventually, you can put the secured card out to pasture. Some issuers will agree to transfer the credit line of the secured card to your new unsecured one.

But let’s not get ahead of ourselves. First things first.

Steps for moving from secured to unsecured

With the secured card, you’ll have to deposit assets for the lender, because it was either unable to underwrite you do to a lack of credit history, or because you had a history that suggested you were a significant credit risk. You need, at the very least, to reverse those assessments before getting the unsecured card. In either case, the road to doing so is the same.

First, establish responsible behavior. Slowly begin making charges each month on your card, but always keep the amount you charge to a level where you know for certain that you can pay that amount off, in full, by the due date. While the issuer will be satisfied if you make only the minimum payment, your goal is to demonstrate that you can pay off everything you charge each month. Plus, you don’t want to carry a balance since you will get charged interest.

Hopefully, as each month progresses, you are able to lift that amount you know you can pay off in full. Chances are, if you are on a stable income, that amount will level out.

Other ways to build your credit

If at all possible, try to establish good credit elsewhere. Some landlords use services that will report your monthly rent payments to credit bureaus. Maybe you need a car. If so, and you need to finance it, that would be another form of credit you can establish. Some utility services report payment information to credit bureaus.

I suggest a solid year of paying that secured card in full and on time. This will definitively establish that you are a good credit risk. Hopefully, you’ve also established other credit in the meantime.

Then call up the issuer and make your case. If they shoot you down, ask what else you can do to earn their trust. Chances are, you’ll already be close.

Credit card image via Shutterstock