Is closing a secured card bad for your credit?

Closing any credit card could hurt your credit scores if that card is reported to the credit bureaus. That’s because closing a card can affect factors that go into calculating your scores. Secured credit cards are no different. 

Read on to find out how closing a secured credit card could hurt your credit and learn ways you might reduce or avoid the impact.

Secured cards aren’t always reported to the credit bureaus. But if yours is, closing your card could impact some of the factors that make up a typical credit score:

• Credit utilization: This is about how much credit you’re using compared with how much you have available. When you close a credit card, you’re reducing your available credit. This could tip your credit utilization over the 30% maximum that the Consumer Financial Protection Bureau (CFPB) says experts recommend. And that could lower your scores.
• Length of credit history: Closing any of your accounts could reduce the average length of your credit history. A secured credit card might have an even bigger impact if it’s one of your oldest credit accounts.
• Credit mix: Let’s say you have a secured credit card and a private student loan. That’s a combination of revolving credit and installment credit accounts—a credit mix. A good mix can be good for your credit score because it shows you can handle different types of credit. Closing your secured card could negatively impact your credit mix, especially if it’s your only form of revolving credit.

So now you know how closing your card might hurt your credit. But everyone’s situation is different, and only you can decide whether closing your card is the right choice.

Here are some situations where closing the card might make sense for you:

• You’re having trouble using your credit card responsibly. Closing the card might help you keep your spending within your means.
• The card has a high annual fee. If you don’t use the card much, annual fees could outweigh the benefits of having it.
• You’re ready to graduate to a traditional card. Using your card responsibly? Your credit might have improved to the point where you can apply for a regular unsecured credit card.  

Closing a secured card isn’t your only option. You could consider these alternatives:

• Keep it open. A paid-off credit card could keep positively contributing to your length of credit history, credit mix and credit utilization. Just keep in mind that your issuer might close your card if you don’t use it at all. Capital One cardholders can protect a card that’s not used often with Card Lock.* It’s easy to use and just takes a few taps on the Capital One Mobile app.
• Look into “graduating.” Once you’ve shown you can use your secured card responsibly, some card issuers let you transition to an unsecured card. Graduating could mean you keep the same line of credit, so you’re not closing an account. Some card issuers may even give you your original security deposit back.

If you decide to close your secured credit card, check your cardholder agreement. It might have information on how you should do it. Here are some steps you might take: 

1. Plan to pay it off. If you have an outstanding balance, pay it off. Depending on the card’s terms and conditions, the security deposit could be used against any remaining balance.
2. Close the account. Depending on the issuer, you might be able to sign in to your account to close it. Or you could call, mail or email your issuer and follow up in writing. You can also ask for confirmation of the closure in writing. If you get the issuer to note that the closure was at your request, that should be recorded in your credit report.
3. Update other accounts. Update any automatic payments that were connected to your secured card.
4. Check your credit reports. Make sure the card closure has been reported properly. You can get free copies of your credit reports from all three major credit bureaus. Visit AnnualCreditReport.com to learn how. 
5. Destroy your card. If you can, shred the card to help prevent identity theft. If not, cut it into tiny pieces.

It might surprise you to know that closing a secured credit card could potentially hurt your credit scores—especially if you were thinking it might help you better manage or streamline your finances. But in some cases, closing the card might still be the right idea. It depends on your financial situation. 

Routinely monitoring your credit could help you make a more informed decision. With CreditWise from Capital One, you can keep track of your VantageScore® 3.0 credit score and TransUnion® credit report. And using CreditWise won’t hurt your score. CreditWise is free and available to everyone—not just Capital One customers.

Knowing where you stand now and how closing a secured credit card might affect that could make it easier to decide what’s right for you.