My husband and I each opened a secure card over 2 years ago from our bank. We have been with USBank for over 15 years. When we opened our secured cards they required a $300 each. We asked if we could build credit faster if we did $500 each and the banker said yes. He told us that if we make on time payments and paid it off every month for 6 mo to 1 yr that they would automatically change us to unsecured cards with a higher amount of credit. Of course we believed him and he pulled up the contract for us each to read on a signature pad. I started reading when all the sudden his computer had some kind of glitch so the sig pad went blank. He told us he would just print the last page so we could each sign it and he would mail us our copies once their system started working. He never sent us anything. I called to speak with him I was told that he got transferred to another town 2 hrs away so that he could finish school. I asked for a copy of our terms and she recommended for me to call the main bank # and they would be happy to send us copies. So I called and was told that they would but never did. I regret & should have been more diligent with them. At the time we had no credit and we each had 2 medical bills. We needed to buy a house because we rented from a lady for 7 years and she needed to have us out so her son could live there. We spoke to an awesome lender to see what we could do to build more credit. We opened a non-secured joint credit card with our bank and inquired about our secure cards on why they hadn’t changed them to unsecured cards. We were told that was not the way it worked and if we wanted to get our $500 ea returned to us that we should close the cards and reapply for an unsecured card each. Our lender told us not to because it would look bad to have closed accounts on our credit. We did eventually buy a home recently.
My husband got a letter today from our bank that if he would like to open a new card with a higher limit that he would be able to close his secure account, get his $500 plus interest back. I’m sure I’ll be receiving the same letter any day now. My concern is that our credit scores will drop because of having a “closed” acct. This is what I’ve read in my research about building credit. Any advice is much appreciated. Sorry so long. Thanks y’all
I would get an appointment with your bank manager and go in there with all of your statements from the cards showing you have paid diligently on them every month and ask them what to do. Then go home with your information in hand and do your own research on what to do then I would find a bank that u trust and move everything to that bank after going in to discuss all that has happened. Something sounds fishy with the bank you took the secured cards out of
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Great question, Frugal Loo!
It’s true that your credit score might drop by a few points if you close the secured cards. So when you were buying a house, it probably made sense to keep the account open. Your lender will typically urge you not to do anything that could change your credit when you’re trying to qualify for a mortgage.
But as long as you don’t need to finance a huge purchase in the next few months, I think it makes sense to close the accounts if that’s the only way to free up your $1,000.
The effect on your credit score will probably be minor and short-lived. Making on-time payments and keeping low balances matter way more in the long run for credit scores than a closed account. (Note: Opening a new account can sometimes cause a temporary credit score drop of a few points, as well.)
Still, before you close your accounts, I think it’s worth another phone call to your bank. Credit card issuers are required by federal law to provide you a copy of your agreement when you request it, so try politely reminding them of that. In most cases, they’re also required to post credit card requirements. The Consumer Financial Protection Bureau has this handy database you can try searching as well:
https://www.consumerfinance.go…eements/#find-issuer
The agreement may not have specifics about when you can switch to an unsecured card. A lot of issuers won’t automatically make the switch, so be sure to ask them specifically if you have the option to switch your current account to an unsecured one instead of opening a new one.
Bottom line, though: It sounds like you’re making smart moves with credit if you were able to buy a house and you’ve qualified for unsecured cards. So if closing the accounts is the only way to get your deposits back, don’t worry too much about the hit to your credit. Keep doing what you’re doing, and it will bounce back!
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I had a similar instance with Discovers secured card. My credit score dropped after closing the secured card because I was able to open a large CL with a well-known bank. I also had a few of those high fee credit cards that I recently closed since I no longer needed to pay a monthly fee to obtain credit. I had 4 and 5 years of PERFECT payments and my credit score tanked. I did not add any new CL’s or accounts in tandem. Now I am working on rebuilding my credit score from the “help” of these credit building aids. No one talks about their end of life when signing up.
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@frugal.loo
What you’re doing is the right path. I echo what @robin.a.neumann says. It was good sound advice by the Lender, kudos to him/her!
As Robin Hartill mentioned, I would go directly to the bank to close those secured cards. Unfortunately, there is so much fine print in legal agreements that there may even be penalties or other surprises besides a small hit on your credit score for closing these cards out.
Don’t forget the shenanigans Wells Fargo served to their “valued customers” for which they basically just received a slap on the back of their fraudulent hands!
I am always a bit shocked when reading the terms included with bank loans, credit card agreements, etc. They should all be read thoroughly but I certainly understand that even if we do, we are not lawyers and we often don’t understand the language used in these contracts, and most of the terms protect the banks not us!
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