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I am pushing my younger brother though college. He's 18 and he's my dependent. I want him to get all straight "A"s so, he will not work until graduates from college.

Meanwhile, I want to start his credit history. Since he is younger than 21 , he can't report part of my income as his income based on the current Income Reporting Regulation, which makes him ineligible for a regular credit card.

The local banks recommend a secured credit card. However I still don't understand how they work.

Whenever the time comes (a year or two whenever his credit is up)

  1. Will the secured credit card transform into a regular credit card?
  2. Or will he have to close it and open a new regular card with the same bank?

There are two options. Which one is it?

The bankers explanations are very vague . However this is a very important thing . For a good credit history one should never close the earliest credit card. What good is a secured credit card if you will want to close it at some point in time ? Do all of them work that way .

Are there any secured credit cards that transform into a regular credit card (transform meaning the same account number stays on the credit report) ?

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With a secured credit card you send the card issuer a check for some amount of money, say $1,000. This $1,000 is your spending limit. You then spend on the card as though it's a regular credit card. You receive statements and you pay the statement. If you don't pay the balance in full you owe interest, just as you would on any other card. In a secured arrangement the bank has very little risk because it already has your money. It's a pretty common way to establish credit.

There are credit card issuers who are more willing to issue unsecured cards to people with limited or no credit history; Discover and Capital One come to mind.

For a good credit history one should never close the earliest credit card.

This isn't really true. There are a lot of different factors that make up a credit score. Average account age is a factor, but it's definitely not the most significant contributor to your score. It's not great to continuously open and close accounts, but it's not the end of the world to close accounts. In fact, I've read anecdotes of account closures actually boosting people's scores. The most significant contributor to your score, as far as I can tell, is payment history.

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  • Thank you. +1 So does the secured credit card transform into a regular one at some point in time when the credit score improves ? Is it possible? (transform meaning the same account number stays on the credit report) ?
    – Emily
    Jul 8, 2016 at 22:37
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    It might be possible to do a "Product Change" (PC in credit card lingo), but typically after you've established your credit you'd want to move in to some kind of rewards card which will involve moving to a different issuer anyway.
    – quid
    Jul 8, 2016 at 22:39
  • I don't know if they all transform but I have a relative who immigrated to the US and his transformed into a regular card after IIRC 7 months. Wells Fargo bank, $25/yr for the secured card.
    – Loren Pechtel
    Jul 9, 2016 at 4:03
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I really wouldn't worry about credit history yet. Check what the school's credit union offers as student charge cards; that is often the easiest thing to get approval for other than a prepaid card... Or just use a debit card for now and think about credit card after graduation.

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