Time to Change Credit Cards?

June 23rd, 2010

If you’re a canny credit card customer, you will be keeping your eye sporadically on offers from rival providers to see if it’s time for you to change credit cards.

However, you may not need to wait until a dazzling offer appears to realise you should make some changes. Taking a look at your own personal situation and whether your card usage matches the basic type of card you have may reveal that you are holding the wrong piece of plastic, even without anything else to compare it to.

This could be the case because you chose unwisely in the first place, or because you sensibly picked a new credit card because of a special offer but, now it’s over, the card’s other features simply aren’t suitable.

Good reasons to change credit cards

If you currently hold a low interest credit card – These seem a very sensible choice because you pay less interest on your purchases. But that interest rate will only apply if you actually make purchases on your card that you fail to clear in full each month. If all you ever do with your card is use it for emergencies or occasional purchases, and you pay your bill in full, then the interest rate won’t matter.

The annual fee, however, will. The trade-off for having a low interest rate can be a higher annual fee. You need to change credit cards to a new credit card with a zero fee if you are currently paying an annual fee for a card you rarely use.

If you currently hold a zero-fee credit card – Reversing the above point, if you have a zero-fee credit card with a higher rate of interest (and sometimes no interest-free days) and you are failing to clear your debt each month, then you will probably be paying out more on interest charges than you saved by avoiding the annual fee. In that case, you would need a new credit card with a low rate of interest as described above.

If you currently hold a rewards credit card – These cards are great for people who spend on their cards a lot anyway but manage to keep their spending under control. They are the wrong choice for people who don’t use their cards much and if you are spending just to earn rewards.

The former point applies if there is a separate fee for the rewards program, because this will far outweigh any benefits you will gain in rewards unless you are regularly putting a good number of purchases on your card – into the $1000s. This will also apply if you are not clearing your debt each month and building up expensive interest. In these cases a new credit card should be sought that better reflects your spending habits, and debt-clearing habits.

Editors Choice: Featured Credit Card Deals

	Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)