How to switch from a secure credit card to a rewards card

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With good financial habits, you could get your deposit back and switch to a card that earns rewards.

When you have bad credit or don’t have a lot of credit history, secured credit cards are usually one of your only options. This type of card requires an initial security deposit, so card issuers can be much more flexible with who they approve.

You probably don’t want the credit card company to keep your deposit forever, and that’s where graduation comes in. Many secured cards can evolve into unsecured rewards credit cards. . If the card issuer allows you to graduate, your deposit will be refunded and you will be upgraded to a card with more benefits.

In some cases, it is possible to switch from a secured credit card in a year or less. If you follow a few steps, you’ll upgrade to a rewards card ASAP.

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1. Choose the right secure credit card

Not all secure credit cards can be graduated. If you choose a secure card that can’t, you’re out of luck. The only way to get your deposit back will be to close the card.

Most of the best secured credit cards offer a degree. You can usually check on the website of the card issuer, especially the page for that secure card. If there is no information as to whether the card can be graduated, try calling the card issuer to ask.

2. Use your card at least once a month

After getting your secure card, you must use it for at least one purchase each month. It doesn’t have to be expensive. You can set up the card as a payment method for a monthly bill you have, like Netflix or Spotify.

There are two reasons why this is important. The first is that you need to build a good payment history to increase your credit score. Every time you have a credit card bill and pay it on time, it improves your credit.

The card issuer will also want to see activity on the card before it allows you to graduate. If you never use your card, the card issuer won’t know whether you can handle the credit or not.

3. Pay your credit card bill on time

The most important habit you can have with your credit card is paying on time. Missed payments lead to late fees, and they can dramatically lower your credit score if they’re 30 days or more late.

Your payment history will also be crucial when the credit card company decides whether or not to upgrade you to a rewards card. If you’ve had late payments, the process will likely take a lot longer.

You might want to set up automatic payment to make sure your credit card bill is always paid on time. Another option is to set a recurring reminder in a calendar app.

4. Don’t let your balance exceed 20% of your credit limit.

Another factor that affects both your credit score and getting a reward card is the amount of credit you use. This is called your credit utilization rate. You can expect the card issuer to assess it as part of the graduation process.

Consumers with the highest credit scores typically have a credit usage of no more than 20%, which means they don’t use more than 20% of their available credit. To switch from a secure card as quickly as possible, it is preferable to do the same.

So if your secure card has a limit of $ 300, always try to maintain a balance of $ 60 or less. To calculate it yourself, simply multiply your credit limit by 0.20.

5. Contact the card issuer

The card issuer will likely review your account periodically to see if it is time to graduate your card. But you might also be able to get the process going faster by calling and asking if you’re already eligible to graduate.

Before you call, check the card issuer’s website for guidance on when they will consider graduation. For example, an esteemed secure card issuer says it will start reviewing your account after eight months. In this case, you should wait at least that long to call.

If there are no guidelines available, then six to 12 months after getting the card is a good time. And if you’re told it’s too early to graduate, you can ask how long it takes.

When used correctly, secured cards are like stepping stones that allow you to build your credit so that you can eventually upgrade to the best credit cards. All it takes are good credit habits, and you’ll be on your way to an upgrade.

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About Nereida Nystrom

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