Not happy with your current credit card deal? Whether you want to upgrade your rewards or downgrade your credit card costs, switching to a new account is simple. Here’s what you need to know.
Maybe you’ve been eyeing your friend’s card because of all the complimentary perks and rewards they get that your card doesn’t provide. Maybe it’s a 0% for 24 months balance transfer that seems too good to pass up. Or perhaps you’re just looking for a card that offers a lower standard interest rate or no annual fee.
Whatever the reason for switching credit cards, being mindful of the following factors will help ensure the process is as smooth as possible.
How do I change credit cards?
These steps will help guide you through the process of changing cards:
- Compare credit cards to find an option that suits your needs. Once you have thought through the questions above, you’ll have some set ideas about the type of credit card you’re looking for. Compare all the cards on offer in that category and find the one that best suits your requirements.
- Apply for the credit card. Now make sure that you satisfy the card’s eligibility requirements, and then apply. Applications are mostly done online and usually take around 10–15 minutes.
- Include details of your balance transfer (if you have existing card debt). Be sure to call your current credit card provider to ask for your entire outstanding balance for closing the account. This will help ensure you are transferring the full balance and don’t get stuck with a small amount owing on the old account.
- Wait for card approval, then activate your new card. If applying online, you can be notified in as soon as one minute if your application has been approved. Your new card may take up to two weeks to arrive, but when it does you will need to activate it following the instructions provided with the card.
- Transfer direct debits to your new card. Before you cut up your old card, you need to make sure there are no direct debits still attached to it. These could attract penalty fees if they’re declined because you have closed the account. An easy way to check what direct debits you had on your old card is to look over your transaction statements for the previous 12 months. Then call these companies and inform them of your new credit card details. You will need to provide your new credit card number, expiry date and verification code. Take note of who you speak to for your own records, and make sure to check the following month that the direct debit has come through on your new card.
- Settle the balance on your old account and close it. This will help avoid any more potential charges on the account, e.g. annual fees, and also eliminate the possible temptation of using it again.
What to consider before changing cards
Before you apply for a new card, make sure you ask yourself the following questions so you’re clear on what type of card to look for.
- Which credit card features are you looking for with a new card? If your current credit card isn't giving you enough value, pinpoint which features you want with your next card.
- How will you be using the card? Changing cards isn’t without its inconveniences, so thinking this through first will help ensure you choose a card you will be happy with long term. Think about how and how often you will use the card, as well as the benefits you want included with the account. Once you’ve identified your needs, you can start to look for the card that will best cater to them.
- What is the minimum and maximum amount of credit you want? Choose your credit limit with care. You need a limit that enables the occasional large purchase, but that doesn’t encourage you to overspend. As a guide, you should only spend up to 70% of your credit limit if you can, which is the recommended credit utilisation ratio for a good credit score.
- Do you meet the minimum income requirements for a new card? Your switch could go sour if the card you want is out of your reach, particularly if considering an upgrade. Always make sure you meet the eligibility requirements before getting ready to switch.
- Do you have existing credit card debt? If the answer is yes, you might want to consider balance transfer credit cards, or a credit card with a balance transfer offer that also fulfills your other needs, such as a 0% balance transfers 0% purchases credit cards.
- Is there any connection between your current provider and the new card provider? When it comes to introductory promotions such as balance transfers, you will also need to consider this: are your current credit provider and new credit provider affiliated? Are the two credit cards in question issued by the same credit issuer despite bearing different names? Depending on the offer, this could limit your options when you want to switch cards for a promotional offer.
- Do you have direct debits on your current card? This is more of an inconvenience than an actual deciding factor, but one you have to address nonetheless. When changing cards, you’ll have to take stock of existing direct debits and make the necessary calls to update your service providers with the details of your new card. This will help prevent any possible late fees or dishonour fees.
What to look for in a new credit card
Once you’re clear on why you’re switching, you can start comparing your options for a new card. Here are the key features and details to consider:
- Promotional interest rates. This could be the very reason you’re changing cards, but look widely and look carefully. There is usually more than one credit card provider offering the same promotional rates. Sometimes you might even find a better offer than the one you had in mind.
- Standard interest rates. These are the interest rates that normally apply for transactions on the account. If there’s a promotional rate offer, the standard rates will apply at the end of the introductory period. Make sure you consider these rates when looking at new cards, because you don’t want to be stuck with high interest charges in the long term if you decide to keep the card beyond the promotional period. Interest-free days on purchases are an ideal way to avoid paying interest.
- Rewards. If you’re looking to earn points for spending on your new credit card, it’s worth comparing the rewards you can earn and redeem. Many card providers offer their own reward programs, while some are linked to specific frequent flyer programs such as Qantas or Velocity. Whatever your preference in reward program, make sure you consider the amount of points per $1 you’ll earn, as well as how many points you’d need for a reward such as a flight or a gift card.
- Complimentary extras. Many credit cards come with additional perks such as complimentary travel insurance, personal concierge services, purchase protection insurance and flight vouchers. Some premium credit cards even offer airport limousine services and airport lounge access. But these benefits often attract a higher annual fee, so they may not be worth it if you’re not a regular credit card user or frequent traveller.
- Annual fees. Most cards charge an annual fee, and generally the cost goes up based on the range of perks available. For example, black credit cards provide a wide range of luxuries and have annual fees ranging from $375 to $700. The rule here is to make sure you’re not paying more in fees than the actual benefits you’ll derive from the card.
- Other fees. Always read the fine print before signing up for a new card, and be aware of any possible fees you could incur. Some of the most common include balance transfer fees, cash advance fees, ATM withdrawal fees, foreign transaction charges and late payment fees.
Whatever your reasons for switching, and whichever credit card you decide to switch to, always make sure you thoroughly compare cards and fees beforehand so that the change is worthwhile. Remember to think long term, because changing cards too often can sometimes look bad on your credit report. Also, after you’ve switched, make sure you stay on top of your introductory offer and do what you need to do to before the offer period ends.