Dear Dr. Don,
For the past six months, I've held a secured credit card with Bank of America averaging a 30 percent month-to-month balance. I've maintained a perfect payment history on the card. When is it reasonable to request a credit limit increase or to request a standard card?
-- William Wonders
The credit limit on most secured credit cards is equal to the amount you have on deposit with the card provider. So, increasing the amount of the deposit would increase your credit limit on your secured card. The typical card requires a minimum deposit of $500, but the deposit can be as much as $2,000 to $15,000, depending on the card issuer.
What you -- and most secured credit cardholders -- really want is to graduate from a secured card to a credit card. The secured card is helping you build a credit history. You need a good payment history over a long enough time period before the lender will approve your credit card application.
According to the Bankrate feature "10 questions before getting a secured credit card," the average secured credit cardholder will qualify for the card provider's unsecured credit card after a year of making timely payments on the secured card. If you want to try to beat the average, call your card provider and ask about their standards.
You want to ask first, because every time you apply for a credit card, your loan application triggers a credit inquiry on your credit report. The inquiry stays on your credit report for two years, but it is only used in calculating your credit score for one year. For more details on credit scoring, download the myFICO.com publication "Understanding Your FICO score." Also, be sure to order a copy of your free credit report.