There’s no doubt that closing a credit card can be tricky. You don't want to hurt your credit score, but you also don't want to keep paying for a card you're not using. So, what's the best way to close a Discover secured credit card? And will closing it affect your credit score?
In this complete guide, we'll answer all your questions about closing a Discover secured credit card. We'll also give you some tips on how to improve your credit score in the long run (hint: you can work with Cheese to boost your score by using our credit builder loans).
How Do Secured Credit Cards Help You Build Credit?
Secured credit cards are a type of credit card that requires a cash deposit as collateral. The deposit is typically equal to the credit limit on the card. Because they don’t require a credit check or good credit at all, secured credit cards are an excellent way to build credit because they report to the major credit bureaus just like any other credit card. As long as you use your secured credit card responsibly and make your payments on time, you will be well on your way to building a strong credit history.
However, secured credit cards usually come with high interest rates and sometimes fees. Another downside of secured credit cards is that if you default on your payments, the issuer can keep your deposit.
What to Know About the Discover Secured Credit Card
Considering getting a secured credit card to build credit? While there are other ways you can build credit (like through a credit builder loan, for example), the Discover Secured credit card can be a great option. Let’s explore the specifics of this secured credit card.
- Annual Fee: $0
- Late Fee: Up to $41 (except for the first time you pay late)
- APR: 25.99% variable rate. (Capital One Platinum Secured credit card comes with a 28.49% variable APR)
- Deposit: The minimum deposit required for the Discover Secured credit card is $200. This will be your credit limit until you are eligible for a review.
- Rewards:
- 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter
- 1% cash back on all other purchases
- 2x Cashback Match (you get an unlimited dollar-for-dollar match of all the cash back you've earned at the end of your first year)
How Much Deposit Do I Need for a Credit Limit?
Discover requires a security deposit of at least $200, which is higher than some other secured cards. However, you’ll find that $200 is pretty standard for most secured credit cards.
How to Increase Your Discover Credit Limit
Discover makes this pretty simple! All you have to do is call the number on the back of your credit card. Or, you can log into the Discover online banking portal or mobile app and click on your card details to request a credit limit increase.
Note that Discover does allow you to request to increase your credit limit for a secured credit card. However, if they approve the new credit limit, you will have to provide them with an additional security deposit.
Instead, it might be better to wait until your seven months are up so you’re eligible for an automatic review. When Discover reviews your account, they’ll determine whether you can upgrade to an unsecured card or not. If you can, wait until this review, Then, speak with them about a credit limit increase without sending in more deposit money.
If you have made on-time payments and have used your unsecured card responsibly then they’ll upgrade you to an unsecured card and refund you your deposit. This usually comes with a credit limit increase as well (which is usually dependent on your credit score and payment history).
How to Close Your Discover Secured Credit Card
If you have a Discover Secured credit card, then you may be wondering, “What happens if I close my card?” As long as you’re fully paid, nothing happens except you will lose that line of credit. This can temporarily hurt your credit score slightly because your credit utilization ratio will go up due to a decreased total line of credit. Keep this in mind!
Still want to close your account? First, make sure that you are ready to close your card. If you still have a balance on it, or if there are other reasons why you need the card open, then hold off on closing it. But if you are confident that you are ready to close your card, here are the steps to follow.
- Call the number on the back of your credit card or call 1-800-DISCOVER;
- Have your personal information and account information on hand;
- Explain why you want to close your credit card.
Note that Discover doesn’t currently allow you to do this process online. However, this is fine since it’s best to ask the customer service representative about your deposit over the phone anyway.
How to get your security deposit refunded
When you close your account, Discover should send you your deposit back. Typically, they’ll send the money to you in the form of a check or issue the refund directly to the bank account you used when signing up.
Better Ways to Build Credit
Getting an unsecured credit card is probably the best way to build credit responsibly over time without taking on too much debt. However, it’s relatively hard to get approved for a good credit card. Plus, you need a Social Security number, a good credit score, and more.
A better way to build credit if you don’t have an SSN or have poor or no credit is to get a credit builder loan. Both credit builder loans and secured credit cards can help people with bad credit or no credit history to improve their credit scores. However, there are several reasons why a credit builder loan is better than a secured credit card.
With a credit builder loan, you have to make regular payments to build your credit score. This helps to show lenders that you’re responsible for repayments. This isn’t technically a requirement for a secured credit card. You can simply open the account and not make any payments because you never use it.
Additionally, with a secured credit card, you have to put up a security deposit equal to the credit limit. This deposit is used as collateral which means that you can risk losing that security deposit and still have to pay any outstanding charges on the card. Likewise, secured credit cards typically have high interest rates and fees. For these reasons, a credit builder loan is generally a better option than a secured credit card for building credit.
Start Building Credit With Cheese
Are you interested in credit builder loans as a way to help you build your credit? Cheese offers a credit builder loan to help you build your credit and save money at the same time!
All you have to do is apply for a credit builder loan of as little as $500 and choose a term length of 12 or 24 months. Use our autosave feature to make on-time payments and build a great credit history little by little. We report your payments to all 3 creidt bureaus.
Sign up here to get started today!
