Using a credit card to pay for things is convenient and it’s also not a bad way to earn some extra perks in the process. Not all cards are created equally, however, and some offer more advantages than others. If you’ve been using one particular card for awhile but your account terms have changed or you just don’t feel like you’re getting the best deal anymore, it may be time to think about switching to a new card issuer. Here are four signs that it’s time to move on:
1. Your interest rate keeps climbing
If you normally pay off your card in full each month, you may not think too much about your interest rate, but it’s a different story when you carry a balance. The higher your rate, the more money you’re basically throwing down the drain and the longer it’s going to take you to zero out the balance. The 2009 CARD Act set some stricter guidelines on how and when credit card companies can hike up your interest rate but that doesn’t mean you’re immune from an APR increase.
If you’re more than 60 days behind on your payment, your credit score has taken a nosedive recently, or you’ve had the card for more than a year, there’s nothing to stop your card issuer from raising your rate. Federal law mandates that you have to be notified 45 days in advance when a rate hike is on the horizon, which gives you time to decide whether you want to shop around for a new card.
You can try calling your creditor up to negotiate a better rate but if they won’t budge, the only way to avoid the increase is to move your balance somewhere else. If you snag a card with a 0% promotional offer, make sure you’re clear on when it expires so you know just how long you have to get it paid off before the interest kicks in.
2. You’re not getting the best rewards
Rewards credit cards are an excellent way to save money on things like travel, hotel stays, or even your weekly trip to the grocery store. Some cards allow you to earn points or miles while others pay cash back and many of them feature additional bonuses, such as discounts on sporting events or entertainment or free insurance coverage for travelers.
Choosing a card with a rewards structure that matches your spending style is the best way to make sure you stay satisfied but what do you do if your card issuer changes the program terms? If you find yourself earning fewer points or miles but charging the same amount to your card, that’s not much of an incentive to stick around.
As you’re comparing rewards cards, one of the most important things to remember is to not let yourself get sucked in by a big sign-on bonus. Credit card companies use them to attract new customers but if you’ve got to spend a lot of money to get it or the card isn’t one that you can see yourself using on a regular basis, opening a new account may not be worth it.
3. You’re getting nickel and dimed with fees
Unless you’ve taken the time to read over your credit card agreement carefully, you may not be aware of just how many different fees your card issuer can charge. Late fees, overlimit fees and cash advance fees tend to take the biggest bite but there are plenty of other smaller charges that can really add up.
For example, if you use your card outside the U.S., you may get hit with a foreign transaction fee which is usually 2 to 3 percent of the total purchase. Some credit card companies will charge you a fee to receive paper statements in the mail or redeem your reward points. On top of all that, you may be paying an annual fee which can range from $25 to as much as $450 for a premium rewards card.
If your card already has a higher interest rate, having all those extra fees added on each month makes it that much harder to make a dent in the balance. When you don’t use the card all that often, it really makes no sense to be handing over money for an annual fee. If your current card issuer isn’t willing to waive the fee or you’re tired of making payments and seeing your balance stay the same each month, kissing them goodbye is a no-brainer.
4. Customer service is nonexistent
When an unauthorized charge pops up on your credit card statement or you need to dispute a billing error, calling up your creditor is the logical thing to do but it can lead to more headaches if customer service is seriously lacking. If you’re spending hours on the phone to resolve a simple issue or you’re having to chase your credit card company down for information, it definitely detracts from their appeal.
Be mindful of your credit
Any time you apply for a new credit card, it shows up as a hard inquiry on your credit report. About 10 percent of your credit score is based on the number of inquiries you have so if you’re planning on switching to a new card, you need to do your homework before you apply. If you just start randomly filling out applications, you could end up knocking points off your score which could make it harder to get approved.
The other thing to think about when you’re contemplating a switch is what to do with your old accounts. The length of your credit history accounts for 15 percent of your FICO score so if you’re closing out cards that have been open for several years, there’s a good chance your score will take a temporary dip. As long as you’re not in danger of being charged an annual fee, you’re better off leaving those accounts open. Just make sure you’re monitoring them regularly for any suspicious activity since dormant accounts are a prime target for identity thieves.
