How to Close a Secured Credit Card in 5 Easy Steps

Secured credit cards are one of the best options for growing your credit from scratch or rebuilding it after some scuffles. But at some point, you’ll be ready to move on — hopefully because your credit is good enough to qualify for better credit cards that don’t require a deposit.

When that time comes, you’ll need to prepare yourself for the closure before you reach out to your credit card company. The process also involves waiting for any security deposit refund, monitoring your finances, and destroying that closed card.

Let’s look more into how to close a secured credit card and when it makes sense to do it.

Key takeaways

• Unlike regular unsecured credit cards, secured credit cards are designed to be temporary.
• Check your cardholder agreement for the specifics on account closure, including rules for deposit refunds.
• See if your credit card company will upgrade you to a regular credit card, which allows you to get a new card while establishing an even longer credit history.
• Update your finances and destroy the card after you close it.

Why might you cancel your secured credit card?

While secured credit cards can help build credit, here are some of the many reasons why you won’t want to keep one open forever.

• Deposit: Secured credit card deposits are usually a few hundred dollars (or more). When you close the card, you’ll generally get your deposit back and be able to do something more useful with it.
• Low credit limit: Most secured credit cards provide a credit limit that matches your deposit amount — which typically isn’t much when it comes to borrowing money. Unsecured credit cards generally offer higher credit limits, which could help boost your credit score if you’re not continually borrowing a large amount of your available credit.
• Overspending: Secured credit cards can be good tools — but only if you use them well. Just as I avoid flying a plane because I’m not a pilot, if credit cards really aren’t for you, then it’s a smart move to close your card before you crash into bigger money problems.
• High interest and fees: You shouldn’t have to pay more than you have to for anything, including your credit card. Secured credit cards come with notoriously high interest rates and pesky fees, which you may be able to avoid by switching to a more affordable unsecured credit card.
• Rewards programs: The best credit cards offer improved rewards in the form of cash back or travel and can help you get more from your spending. I’ve paid for trips to Maui, Peru, and the U.K. entirely with credit card travel points.

How will the account closure impact your credit?

If you’re like most people, you opened your secured card in the first place to build your credit score. Now that you’re there, there’s no point in closing the card if you’ll just land up right back where you were — and yes, in general, closing any credit card can drop your credit score to some degree.

However, this doesn’t mean that the credit impact will necessarily be catastrophic or that it’ll last a long time. It just depends on how the following credit scoring factors interplay with your situation.

• Credit mix: If your secured card is your only credit card, you can expect a lower drop in your credit score than if you have other cards open. That’s because your credit mix — i.e., loans and revolving credit accounts like credit cards — makes up 10% of your credit score, so it’s good to have variety on your credit report.
• Credit history length: If you don’t have any other older accounts listed on your credit report, you can expect a bigger drop in your score when you close your secured card. This factor makes up 15% of your credit score.
• Credit utilization ratio: If you have other credit cards, take note of their combined credit limit and keep your total balances below 10% of this mark. Since you’ll have less credit available after you close your secured card, you won’t be able to have as high a balance without negatively impacting your credit utilization, which makes up 30% of your score.

It’s wise to use a credit score simulator tool by one of the many financial services companies such as Chase. Though they aren’t necessarily totally accurate, they can give you some idea of what might happen after you close your credit card.

Deciding whether to close your card

As with any big decision, you’ll need to consider how this one choice impacts your other short- and long-term goals. Here are the most important questions to ask yourself before closing your secured card.

• What are your goals? If you’re hoping to buy a house in the next few months, then closing your account now could harm your credit score and even disqualify you for a mortgage. But if you’re looking to build an emergency savings fund, that deposit refund could provide a strong boost.
• What alternatives are there? You don’t always have to close your card in order to achieve your goals. For example, many secured credit card issuers will upgrade you to a better credit card so you can keep your current line open. We’ll go into some more alternatives later.
• What are the consequences? You’ll face some consequences every time you close a credit card. Your credit score may drop by a lot or just a little. If you know the consequences in advance, you can make a more informed decision.

How to close a secured credit card in 5 steps

Closing a secured credit card works the same as closing an unsecured one — just with the added twist of dealing with the deposit. Let’s look at how it works.

1. Prepare for the closure

First, check your credit card agreement. Each credit card issuer sets its own terms about when and how you can close your credit card as well as what happens to your security deposit. Most follow the same general steps, but that’s not always the case.

In addition, make sure you change any recurring charges for utilities and other bills from your card to another payment method. If those charges don’t go through and you don’t catch it in time, the providers might charge returned payment fees or cancel your services. Check your card statement for the past few months to make sure you don’t miss anything.

If your secured card offers any rewards, make sure you redeem them before the closure to avoid potentially losing them. Now’s also a good time to shop around for any other credit cards you might want to open or to consider alternative options, such as upgrading your card with your current issuer.

2. Contact your credit card company

Each credit card issuer has its own way of processing customer requests to cancel their secured credit cards. You might be able to do this by logging into your account online, calling customer service, or even sending in a mailed letter. Regardless of the initial method, a written follow-up provides you with a helpful record.

If you aren’t clear after reading the cardmember agreement, make sure you ask the creditor any questions to clarify what happens to your deposit. It’s also a good idea to ask for confirmation that they received your request and are processing it.

3. Wait for any security deposit refund

Depending on your card issuer’s policies, you might receive your security deposit refund in a few different ways.

If you haven’t paid off your entire balance yet, the credit card company may use some or all of your deposit to pay off the balance in the form of a statement credit. It might then send the remainder to you.

If you’ve already paid your balance off, you might get your deposit via a check or ACH deposit. The amount of time this takes to process also varies by credit card issuer. For example, Self Financial, Inc. says it’ll return your deposit within 10 to 14 business days after you close your account.

4. Stay updated on your finances

Closing any credit card sets in motion a few waves of change that you’ll want to monitor carefully. If things aren’t going as planned, they could impact something you weren’t expecting. Here are some steps to take after the closure.

• Pay off any remaining card balance promptly to minimize fees, interest, and potential delinquencies.
• Keep tabs on your credit score so you’re aware of any changes.
• Wait a month and check your credit report to verify the account is marked as closed.
• Keep a close eye out for notifications in case you missed switching over any recurring charges from your old secured card.

5. Destroy your closed secured card

Run your plastic credit card through a powerful shredder if you can — or at least cut it up into many tiny pieces. If it’s a metal card, you should send it back to the credit card company for disposal. Even though your account is closed, it’s better to be safe than sorry when it comes to things like identity theft.

How to manage your credit after account closure

The best way to manage your credit after you close a secured credit card depends on your situation. If you don’t have any other open credit cards — and you think you can handle credit cards in general — consider opening a regular unsecured credit card. This could help you continue to build a strong credit score.

Here are some additional tips that can help you grow your credit.

• Always sign up for autopay on your regular bills if you can. It’ll help you avoid missed payments, and I like that it’s also one less thing to have to remember.
• Work on building an emergency fund so you don’t have to rely on credit card debt when life’s surprises happen. I keep mine in a high-yield savings account so that my emergency savings keep growing nicely with little effort.
• If you don’t have any open loans on your credit report, consider applying for some kind of loan the next time you need to borrow money. Just think through the decision carefully.
• Get in the habit of tracking your budget each month. It will help you avoid overspending and racking up a balance you can’t afford to pay.
• Pay off your credit cards in full each month whenever you can. You won’t pay interest on your purchases, and you’ll keep your balances more manageable.

Alternatives to closing your secured card

Depending on your goals, you might not need to close your card at all.

Keep the card longer to build credit

If your credit score isn’t where you want it yet, you might keep the credit card open for longer. Be aware, however, that some card issuers will automatically upgrade your account after you’ve been using the card responsibly for a certain amount of time. Just remember to have your monthly payments set up on autopay and to try to keep your balances low.

Convert to a regular credit card

A major credit card issuer might let you upgrade to a regular unsecured credit card after a certain time, such as six or 12 months. If available to you, this is an especially good option because it generally appears as the same line of credit on your credit report. So, you could build an even lengthier credit history versus severing that line and opening a new one.

After all, time is one of the hardest factors to manipulate when you’re building credit. You can do things like paying down your credit card balance and signing up for autopay, but you can’t go back in time to extend your credit history. Plus, your card company might not even do a hard credit check, which can otherwise drop your score a bit. You may even get to keep your same credit card number so you don’t have to update all of your bills on autopay.

FAQ

Bottom line

Secured credit cards are designed to get you to bigger and better places. When the time is right, check your cardholder agreement for its account closure policies. This document will guide you on how to close your secured credit card and get your security deposit back.

Finally, before you pull the plug, check with your card issuer to see if they can bump you up to an unsecured credit card if that’s your ultimate goal. Many people aren’t even aware that it’s an option, but it’s a great way to extend the benefits of your existing card into your future adventures. Whatever you do, just don’t forget how cards impact your credit and finances.

Great Starter Card for Those With No Credit

Petal^® 2 "Cash Back, No Fees" Visa^® Credit Card

4.9

FinanceBuzz writers and editors score cards based on a number of objective features as well as our expert editorial assessment. Our partners do not influence how we rate products.

Petal^® 2 "Cash Back, No Fees" Visa^® Credit Card

Learn How to Apply

Current Offer

Reports to all three major credit bureaus

Annual Fee

$0

Rewards Rate

Unlimited 1% cash back on eligible purchases; after 6 on-time payments, earn 1.25% cash back; after 12 on-time payments, earn 1.5% cash back

Benefits and Drawbacks

Benefits

• Earn 1.5% unlimited cash back on all eligible purchases after 12 on-time payments
• 2% to 10% cash back on select merchants
• Great for those with little to no credit history
• No annual fee
• No foreign transaction fee

Drawbacks

• Not a great fit for those with poor or bad credit
• No balance transfers or cash advances

Card Details

• Reports to all three major credit bureaus
• Unlimited 1% cash back on eligible purchases; after 6 on-time payments, earn 1.25% cash back; after 12 on-time payments, earn 1.5% cash back