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A secured credit card is a credit card backed by a deposit from the cardholder. This deposit serves as collateral if the cardholder can’t make a payment so card issuers aren’t left hanging. Because of the deposit required to have a secured credit card, these cards are usually issued to those with no credit history or bad credit. They also generally have more fees, higher interest rates, and lower credit limits associated with them.

Eventually, you’ll want to graduate to a regular credit card. And when you do,  you’ll have a lower interest rate, pay less in fees, and have a higher credit limit. But how do you know when you’re ready to make the switch, and how do you switch from a secured credit card to a regular credit card?

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Are You Ready to Switch From A Secured Credit Card to a Regular Credit Card?

Before you switch from a secured credit card to a regular credit card, you’ll need to know when to switch and how to switch.

When is a Good Time to Switch?

A good time to switch is when you’ve been able to make all your monthly payments on time for 12 to 18 months. During this time, you should maintain a credit utilization ratio (the amount of credit you use compared to the amount of credit you have available) of 30% or less. The recommended credit score to switch is when your credit score is 650 or higher.

Learn more about what credit score you need to get a credit card.

How to Switch From a Secured Credit Card to a Regular Credit Card?

There are two options for switching from a secured credit card to a regular credit card.

Your first option would be to ask your current provider if they have any unsecured credit cards. Because you have been a client of theirs before, they may be more inclined to issue you a secured credit card. 

Your second option would be to apply for an unsecured credit card with a new provider. You should look for a credit card that best suits your needs. Consider how you will use the card, the interest rate, the credit limit, annual fees and penalties, and the benefits that come with the card.

Once you have chosen a credit card, carefully review the application requirements. Do you have the necessary credit score? Do you earn enough income to qualify for the credit card? Asking yourself these and similar questions is important so that you don’t apply and get rejected needlessly.

You may also choose to close your secured credit card. If you do, you will get your deposit back, but doing so may also negatively impact your credit score. When you close a credit card account, especially one that you’ve had for many years, it lowers your total credit history. The amount of time you’ve been using credit is one of the main factors that affect the calculation of your credit score.

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Benefits Of Switching to a Regular Credit Card

Because of the higher fees and interest rates and lower credit limits associated with secured credit cards, these cards generally offer little in the way of extra benefits. Regular credit cards have benefits such as rewards points, cashback, insurance, and other perks.

Other benefits of regular credit cards include lower interest rates, lower fees, higher credit limits, and not having your card secured with a deposit.

How Will the Switch Affect Your Credit?

Applying for a regular credit card will likely result in a hard credit check. You will take a temporary hit to your credit because of the credit check.

Closing your secured credit cards will affect the length of your account history, and will thus negatively impact your credit score.

Secured Credit Card FAQs

Should I keep my secured credit card open after getting a regular credit card?

It depends. Closing your secured credit card means you get your deposit back. But, it also means that the length of your credit history will be shortened, which can affect your credit score. If you keep it open, it doesn’t affect your credit, but you won’t get your deposit back.

How do I know if my credit score is high enough for a regular credit card?

You can check your credit score using the credit bureaus or any third party credit score provider. Remember that the recommended credit score to switch to a regular credit card is 650. 

What should I do if I’m rejected for a regular credit card?

If your application for a regular credit card is rejected, don’t worry! Continue building your credit score. The next time you apply, check the provider’s requirements. Different providers have different credit score and minimum income requirements. Apply only if you are confident that you will be approved for a regular credit card because applying can negatively impact your credit score.

Final Thoughts

Secured credit cards are a great way to build a credit history if you have no credit or bad credit. These cards act much in the same way as regular credit cards but are backed by a cash deposit as collateral in case you can’t make payments. They have higher interest rates and fees and lower credit limits than regular credit cards, so eventually, it will be time to switch to a regular credit card. If you build your credit score to 650 or above and carefully review the application requirements, you should have no trouble getting a regular credit card.

Matthew Taylor avatar on Loans Canada
Matthew Taylor

Matthew joined the Loans Canada writing team in 2021 while was finishing up a Bachelor's degree at the University of Saskatchewan. It was there that he discovered his love of writing. His work has appeared in several publications, including the Canadian Student Review and In his spare time, Matthew enjoys reading, geocaching, and spending time with his family and pets.

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