diff --git a/app/src/main/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModel.kt b/app/src/main/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModel.kt
index 1e61245af..458e2a454 100644
--- a/app/src/main/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModel.kt
+++ b/app/src/main/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModel.kt
@@ -76,6 +76,11 @@ class SetupUnlockViewModel @Inject constructor(
     }
 
     private fun handleCloseClick() {
+        // If the user has enabled biometric or PIN lock, but then closes the screen we
+        // want to dismiss the action card.
+        if (state.isContinueButtonEnabled) {
+            firstTimeActionManager.storeShowUnlockSettingBadge(showBadge = false)
+        }
         sendEvent(SetupUnlockEvent.NavigateBack)
     }
 
diff --git a/app/src/test/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModelTest.kt b/app/src/test/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModelTest.kt
index 03ecc23e8..cabde2dbb 100644
--- a/app/src/test/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModelTest.kt
+++ b/app/src/test/java/com/x8bit/bitwarden/ui/auth/feature/accountsetup/SetupUnlockViewModelTest.kt
@@ -352,8 +352,23 @@ class SetupUnlockViewModelTest : BaseViewModelTest() {
                 awaitItem(),
             )
         }
+        verify(exactly = 0) {
+            firstTimeActionManager.storeShowUnlockSettingBadge(showBadge = false)
+        }
     }
 
+    @Suppress("MaxLineLength")
+    @Test
+    fun `CloseClick action should update the first time state to false if continue button is enabled`() =
+        runTest {
+            val viewModel =
+                createViewModel(state = DEFAULT_STATE.copy(isUnlockWithPinEnabled = true))
+            viewModel.trySendAction(SetupUnlockAction.CloseClick)
+            verify {
+                firstTimeActionManager.storeShowUnlockSettingBadge(showBadge = false)
+            }
+        }
+
     private fun createViewModel(
         state: SetupUnlockState? = null,
     ): SetupUnlockViewModel =