With modern life, it’s very easy to stick with what works. Given all the tech headaches or traffic or just nonstop news that we experience day to day, researching credit cards probably comes at the bottom of a long list of to-dos. However, maybe it’s time you take a look at the latest offerings, especially if you’ve had the same card for many years.
Reasons you might want a new card
Travel. One impetus that spurred me to apply for a new card was a trip we took to Europe several years ago. The cards my wife and I had were fine, but they all charged a 3% foreign transaction fee. This isn’t a huge amount but given there are numerous cards that charge no fee, we figured why not apply for new cards. We each got no foreign-fee cards, but one of us chose a Visa and the other a Mastercard just in case we ended up somewhere where one brand wasn’t accepted.
Improving financial situation. You may discover your credit score is approaching 800, or maybe you notice better credit card offers in the mail, but if you’ve successfully turned your financial life around, congratulations! Now take advantage of it. If you have high-interest cards and are seeing better offers, consider adding a new card to your wallet.
Paying a fee. I’ve written about annual fee cards before. Sometimes it makes sense to pay a fee, but there are hundreds of cards available without any annual fee. If you’re happy with a no-frills card, don’t pay for the privilege when no-cost alternatives exist.
Reward yourself. In fact, why go with just a plain card anyway? Many cards offer cash back or points back rewards based on what you spend. Some of these even give you a bonus for spending money immediately. One card I recently applied for gives me $200 if I spend $500 in the first three months. Our weekly grocery bill will take care of this without any worries. If you’re using credit responsibly, there’s no sense in missing out on rewards.
Independence. The world has changed since my parents’ generation, where wives went by Mrs. So and So and the husband held the purse strings. Yet many people still piggy-back on others for their credit card needs. Maybe you have a card that you used in college but it’s in your mom’s name. Or perhaps when you were married, your credit score wouldn’t allow for a credit card approval so you are a listed user on your wife’s card. Whatever the case, having your own card gives you a sense of independence while also protecting you from someone misusing the joint card (and negatively affecting your credit).
Balance Transfer. There’s a reason I put this last. Balance transfers from a high-interest card to a low- or zero-interest card can be a great way to pay off debt. They can also tempt you into higher debt. If you have a plan and can stick to it, transferring your balance to a new card may save you money over time.
Mix and Match
Before starting your research, take a few minutes to consider what’s important in your next card. Are you planning to travel and want miles for the money you spend? There are travel cards – both with and without an annual fee – that can help you. Similarly, if you are a warehouse store fan, both Costco and Sam’s Club have cards that provide benefits. And there are very competitive 1.5% to 2% cash-back cards where you just spend and don’t have to worry about the specific card for the specific situation.
Research
Websites will help you but remember that many are paid for their recommendations. One of my favorite cards was shown below all the fancy lists, in plain type at the bottom of one of these comparison pages.
Warning
Opening a new credit card can help your credit rating over the long haul, especially with the credit utilization portion of your credit score. However, it will probably lower your score immediately since the card company will pull a credit report.
Don’t apply for too many cards. Applying for one card shouldn’t lower your score too much. However, applying for three may tank your score. Find the one card that best suits your needs now and go for it. If there’s a second that you also want, wait at least six months (many people say a year) before applying.
Consider keeping old cards. While you may want to move on from the high-interest cards of the past, consider keeping your old card accounts open. I wouldn’t suggest this with joint cards, because another person’s misuse can hurt your credit score. However credit history is one of the five pieces that make up your credit score. The longer your accounts are open, the stronger this portion of the score. If the card is in your name only, consider charging a monthly subscription to the old card, then stick it in a drawer and enjoy the benefits of your new card!
Photo by Anete Lusina