Switching credit cards has become more common as consumer loyalty to banks has plummeted. While switching credit cards may not be as easy as, say, putting on a new pair of shoes, it is a definite possibility.
Use the credit card finder now to see what options are out there!
Perhaps your current credit card company is making you unhappy, or you are looking for a card that better suits your needs. This article will look at some of your options and possible consequences for switching.
Why would I want to switch credit cards?
High interest rates are at the top of the heap for reasons to switch credit cards. Certain cards can also offer various perks, such as a cash back credit card or a reward credit card, which may appeal to you. Going from a high interest to a low interest credit card automatically reduces your debt, especially if you find a balance transfer credit card that has a grace period without any interest.
Before moving your entire balance due to a new card, however, make sure to look at the balance transfer fee. This is typically a percentage based on the total amount you owe.
Depending on the size of your debt, you may not be able to cut it much at all if the balance transfer credit card charges the same interest rate as your current card. Another caveat is looking at the interest rate after the grace period.
Many cards encourage you to switch by offering a zero percent interest rate for a specific amount of time. Make sure to review what the interest rate is after the promotional period so you don’t end up with a higher interest rate than one you currently have.
Will I be eligible for any credit card of my choice?
The choices for a new credit card are extensive, provided you have good credit. MSN Money notes that banks have become incredibly strict with their lending.
Consumers with high credit ratings are likely to have many new credit cards from which to choose, while those with bad credit may be severely limited.
It’s also important not to go hog wild and apply for many different cards at one time. Sending out multiple applications for credit cards can damage your credit score. Specifically, applying for a new credit card affects your credit score by putting a hard inquiry on your credit report, according to Bargaineering.com.
Hard inquiries can add up and pull down the overall credit score. This can be particularly damaging if your credit score is on the lower end of a rating range and you are pulled down into the lower range.
Frequently switching credit cards can also damage your score. It’s better to make sure you research to find a credit card that will work for the long haul and stick with it for as long as possible.
Should I kill off my old credit card?
When you do find a new credit card, closing out your account on your current card is not always the best idea, SmartMoney says. Part of your credit score is based on how much credit you have available to you versus how much that credit you use.
When you close out an existing account, you automatically lower the amount of available credit and eventually reduce your ratio of how much credit you have versus how much you use.
Your long-term credit history is another factor that can affect your credit. If you keep the old credit card around, it can help your overall score by extending the average age of your various accounts.
How do I know what choices I’ll end up with?
Getting a copy of your current credit report can help you discern where you stand in the eyes of potential creditors. You can also check for any mistakes that may be adversely affecting your score.
In addition to your credit report, creditors evaluate several other factors when considering your application, according to the Federal Trade Commission. Your credit card application itself comes into play, as do:
- Your overall number of accounts
- The types of accounts
- How much of your available credit you use
- Your account and bill-paying histories
They also review if you are prone to late payments and if you have any outstanding debt or collections actions against you.
You can obtain copies of your credit report from the major credit reporting agencies: Equifax, Experian and TransUnion. While you’re waiting for your credit results, you can make sure the wait is worthwhile by reviewing a number of available options for switching credit cards.
Use the credit card chaser now to find a new credit card that may put your existing credit card to shame or give you the perks you want!