topic Re: Closing Secured Card With Balance in General Credit Topics

Closing Secured Card With Balance

Iusedtolurk — Sun, 05 Dec 2021 15:39:31 GMT

Starting to help dd with credit scores so I made her an authorized user on my almost 4 year old credit card. She has now 5 credit cards (unsecured with low balances) and one secured with high balance.

Rather than paying down the high balance secured card I believe she will benefit more closing it (pretty new so AAoA will not be affected).

When you close a secured card with a balance do they automatically apply the secured amount to the balance? then refund what's left.

Seems that this is the logical procedure but in learning about credit the logical is not always the outcome so I'm just making sure no pitfalls occur as I have never been in a position to close a secured card.

Re: Closing Secured Card With Balance

SouthJamaica — Mon, 06 Dec 2021 03:39:48 GMT

@Iusedtolurk wrote:
Starting to help dd with credit scores so I made her an authorized user on my almost 4 year old credit card. She has now 5 credit cards (unsecured with low balances) and one secured with high balance.

Rather than paying down the high balance secured card I believe she will benefit more closing it (pretty new so AAoA will not be affected).

When you close a secured card with a balance do they automatically apply the secured amount to the balance? then refund what's left.

Seems that this is the logical procedure but in learning about credit the logical is not always the outcome so I'm just making sure no pitfalls occur as I have never been in a position to close a secured card.

I would not rely on that; I would pay it off and then close the account. It's too risky to have a closed account with a balance, because the balance will count against your utilization, but the limit will not count as available credit.

Re: Closing Secured Card With Balance

calyx — Tue, 07 Dec 2021 15:09:40 GMT

The other reason to not rely on just closing the card is that there may be verbiage in the TOS that will cause them to report lates anyway.
If you have the original TOS and you can be SURE that the reporting won't get away from you, she would have a ding in utilization, but it would go away. I'd be far more concerned that the company would not consider the account closed in proper standing since a balance is due.

I would at the minimum, talk to a CSR (and hope they're correct/competent/giving the correct information you need)

Re: Closing Secured Card With Balance

Iusedtolurk — Tue, 07 Dec 2021 16:32:11 GMT

@SouthJamaica wrote:
@Iusedtolurk wrote:
Starting to help dd with credit scores so I made her an authorized user on my almost 4 year old credit card. She has now 5 credit cards (unsecured with low balances) and one secured with high balance.

Rather than paying down the high balance secured card I believe she will benefit more closing it (pretty new so AAoA will not be affected).

When you close a secured card with a balance do they automatically apply the secured amount to the balance? then refund what's left.

Seems that this is the logical procedure but in learning about credit the logical is not always the outcome so I'm just making sure no pitfalls occur as I have never been in a position to close a secured card.

I would not rely on that; I would pay it off and then close the account. It's too risky to have a closed account with a balance, because the balance will count against your utilization, but the limit will not count as available credit.

Good points.

Re: Closing Secured Card With Balance

Iusedtolurk — Tue, 07 Dec 2021 16:35:32 GMT

@calyx wrote:
The other reason to not rely on just closing the card is that there may be verbiage in the TOS that will cause them to report lates anyway.
If you have the original TOS and you can be SURE that the reporting won't get away from you, she would have a ding in utilization, but it would go away. I'd be far more concerned that the company would not consider the account closed in proper standing since a balance is due.

I would at the minimum, talk to a CSR (and hope they're correct/competent/giving the correct information you need)

Will definitely have her check with CSR on proper closure procedures so as to not cause any unexpected negative effects. Also will see if she can pull up original TOS and go through it.

Re: Closing Secured Card With Balance

SouthJamaica — Tue, 07 Dec 2021 19:36:17 GMT

@Iusedtolurk wrote:
@calyx wrote:
The other reason to not rely on just closing the card is that there may be verbiage in the TOS that will cause them to report lates anyway.
If you have the original TOS and you can be SURE that the reporting won't get away from you, she would have a ding in utilization, but it would go away. I'd be far more concerned that the company would not consider the account closed in proper standing since a balance is due.

I would at the minimum, talk to a CSR (and hope they're correct/competent/giving the correct information you need)
Will definitely have her check with CSR on proper closure procedures so as to not cause any unexpected negative effects. Also will see if she can pull up original TOS and go through it.

CSR's have been known to give incorrect information.

On something so important, I wouldn't take chances.

Re: Closing Secured Card With Balance

FireMedic1 — Tue, 07 Dec 2021 19:39:51 GMT

If its a Credit One card. Get a letter from them that it really is closed. Many horror stories about them saying its closed and its not. Then here come lates for fees thinking it was closed.

Re: Closing Secured Card With Balance

Iusedtolurk — Tue, 07 Dec 2021 21:14:46 GMT

@FireMedic1 wrote:
If its a Credit One card. Get a letter from them that it really is closed. Many horror stories about them saying its closed and its not. Then here come lates for fees thinking it was closed.

@FireMedic1 It's an Opensky secured card which never graduates to unsecured.

Re: Closing Secured Card With Balance

FireMedic1 — Tue, 07 Dec 2021 21:39:40 GMT

Yeah you didnt say which company it was. Didnt want to see you go thru Cred1 nightmares when it comes to closing the account.

Re: Closing Secured Card With Balance

calyx — Wed, 08 Dec 2021 01:12:53 GMT

with Opensky, the balance has to be paid when closing the account for it to be closed in good standing.
So pay the balance, and then close the account.

Re: Closing Secured Card With Balance

Remedios — Wed, 08 Dec 2021 02:17:00 GMT

Every secured card must be paid by your own funds, deposit is returned once card is paid off.

If lender uses deposit to cover balance, that means card has been charged off.

There are no exceptions to that rule and it's covered in every cardmember agreement.

Re: Closing Secured Card With Balance

Iusedtolurk — Wed, 08 Dec 2021 04:00:51 GMT

@calyx wrote:
with Opensky, the balance has to be paid when closing the account for it to be closed in good standing.
So pay the balance, and then close the account.

Appreciate the feedback!

Re: Closing Secured Card With Balance

Iusedtolurk — Wed, 08 Dec 2021 04:04:21 GMT

@Remedios wrote:
Every secured card must be paid by your own funds, deposit is returned once card is paid off.
If lender uses deposit to cover balance, that means card has been charged off.
There are no exceptions to that rule and it's covered in every cardmember agreement.

Good to know! That's why I love this forum. The data points, experiences and wealth of knowledge.

I will tell her my initial thoughts were wrong and together we will pay off her balance and wait for her deposit return.