Credit Cards are in different forms or types. But when we talk of secured credit cards, we mean cards that require that you deposit additional cash; and this additional cash acts as "collateral." Some people might see it as positive, meanwhile some people do not see it as such.
Meanwhile, with the unsecured credit card, you do not need to deposit any other amount as colateral. They both have their advantages and disadavantages.
However, if you are here, we believe you do not like using a secured credit card, and want to upgrade it to an unsecured credit card. In this guide, we will show you how it is done, and every important things related to it that you must know.
How to Upgrade a Security Credit Card
Understanding Secured and Unsecured Credit Cards
As we explained above, secured credit cards come with a must to pay or deposit cash used as colateral. The advantage with this is that, you can easily get another card in case you get bad credit in the nearest future.
And the risk of bad credit when using a secured credit card is usually higher than when using an unsecured credit card. But the big question is, how does the upgrade go?
Well, most credit card issuers will upgrade your secured credit card to an unsecured credit card after observing your usage, whether you have good credit, whether you respect all their demands and everything.
However, it usually takes very long periods of time (ranging as from 6 to 18 months of observation). However, it depends, they can decide to upgrade it automatically before the 6months or even after the 18 months. So it all depends on how they observe your usage.
Well, even though most of them do upgrade it automatically, there are things you can do so that it can be faster, or that can cause a quick upgrade.
How to Upgrade a Secured Card to an Unsecured Card
While the exact steps to follow to upgrade your secured credit card will vary by card issuer, the general process remains very familiar.
1. Responsibly Using your Card
There are proper ways to use your credit card. And card issuers take this very seriously to see if their users merit a better status or not. So how should you do that?
Pay on Time: You should always make sure to pay the due credit or amount on time. Paying on time will make them understand you do not have debts with them, and it will give you a clean a good credit score.
Pay More Than The Minimum: According to the Consumer Financial Protection Bureau (CFPB), you should always pay as close to the required amount as possible. So, if you have to pay $100, try paying as close to the $100 as possible. And if possible, just pay it all, and even more than it. Doing so will give you a perfect credit score.
Credit Utiliszation Should be Kept Low: It is known in percentage, that is 10%, 24%, 80%, or any other. And so, it is adviced to always keep this as low as possible, not crossing 30% for a good credit score. It is calculated by how much credit you’ve used versus how much credit you have.
2. Good Credit Habits
Once you get a secured credit card, you have provided some information that the card issuer will be able to see all your previous credit accounts, finance accounts and track records who will be able to determine if you have a generalized credit score or not.
And so, using your secured card responsibly is not all, but keeping a generalized good credit score is best. It will quickly qualify you for an upgrade.
3. Check for an Automatic Upgrade
Each credit card issuer usually have a period of time so that they can check your score (usually around 6 months). Even though it can be lower than 6 or even more than 6months. But the general period of time is 6 months.
And if you're good, they'll automatically qualify you for an upgrade to an unsecured card user. However, some might turn a blind eye, and in such cases what do you do? That's where the next step comes in.
4. Request for an Upgrade
If you know your credit score and believe it is good for upgrading, then you have to apply for an upgrade. However, it is adviced to wait for up to 12 months first so that it can be easily approved.
And so, if you have been using a secured card for 12 months or more, then ou should request an upgrade. Your credit card issuer will check your score, and your credit history and if you are good, then they will upgrade your card to an unsecured card.
5. What of Other Options?
Not all credit card issuers permit upgrading secured cards to unsecured cards. In such cases, you will have to apply for an unsecured card. You can do this by contacting them, and they will get you a new unsecured credit card.
Keep In MindYou should not close your Secured credit card account. Becasue, closing a secured credit card could impact your credit score since it would decrease your overall credit limit and reduce the length of your credit history. So whenever possible, you should opt to upgrade your secured credit card with your current credit issuer over signing up for a completely new credit card.
How Do I Get My Security Deposit Back?
Well, upgrading your secured credit card into an unsecured credit card simply means your security deposit that was used as colateral is useless for them and becomes refundable.
And so, if you have already ugraded your secured credit card, then you should be refunded the security deposit. If not, contact them so that they do so immediately.
Difference between Secured credit card and Unsecured credit card
Secured Credit Cards
- Requires a cash deposit that serves as collateral. This deposit usually becomes the credit limit.
- It is ideal for individuals with no credit history or poor credit, as it helps in building or rebuilding credit.
- Generally easier to obtain, even for those with bad credit.
- May have higher fees and interest rates compared to unsecured cards.
- The deposit used as colateral is refundable if the account is closed in good standing or upgraded.
Unsecured Credit Cards
- No Collateral: Does not require any deposit; credit limit is based on the individual's creditworthiness.
- Suitable for those with a good credit history; can offer better rewards and benefits.
- It is more challenging to qualify for especially if you have poor credit.
- They typically have lower fees and interest rates relative to secured cards.
- No requirement for a refundable deposit.
In summary, secured credit cards are designed for those who may need help building or repairing credit, while unsecured credit cards are available to individuals with established credit profiles and typically offer better terms.
Final Remarks on Security Credit Card Upgrade
Many people get tired of using a secured credit card, may be because of the limited features like the limited amount to be used as credit, and several other things. And with all these limited features, they want to get better offers with the unsecured credit card.
Well, in this guide, we explained how to be able to upgrade your credit card. We said you should first of all start byu keeping a good credit score. And this should not only be with the secured card you use, but it should be something generalized with all the credit cards you've previously used.
And if you have done these very well, then you will qualify for an upgrade (keeping a score below 30%). And if your card issuer does not automatically upgrade your account, apply for an upgrade. Otherwise, try going for a completely new card issuer or applying for an unsecured credit card.