Retirement Income

Joanita Wibowo

4 things you should consider before switching credit cards

4 things you should consider before switching credit cards

Thinking about changing your credit card? Our lifestyle and how we use our money can change throughout the years, so it’s always good to re-evaluate your spending habits from time to time and check if your card still fits the bill.

Here are the four things you should consider before switching to another credit card.

1. Annual fees

The annual fee is not always a deal-breaker – in general, the higher the annual fee is, the more rewards and features the credit card offers. However, if you don’t use your credit card often, you are unlikely to get value out of it as the annual fee cancels out the benefits.

Some cards will also waive annual fees if you spend a certain amount in a year. But if you are not a big, regular spender, a zero-dollar annual fee card might be what you are looking for.

2. Interest rates

Not everyone can pay their bill in full every month – and this is where interest rates matter. Your ability to repay debts may be significantly influenced by the interest rates of your credit card. You may end up getting stuck in a cycle if your card is charging interest rates faster than you can pay off the bills.

When this occurs, you might want to find a balance transfer credit card with a low or zero per cent interest rate for a limited period. You can then move your debt from the old card to the new one, save on interest and focus on getting on top of your balance.

3. Foreign transaction fees

When you are travelling overseas, having a credit card can give you a peace of mind – it makes transactions possible even if you don’t have cash at hand. This convenience comes at the cost of foreign or international transaction fees.

You don’t even have to be abroad to be hit with these fees – if you are shopping online and the merchant happens to be out of the country, the card can still charge you to cover the currency conversion. Most banks and credit providers generally charge between 2 to 3.5 per cent on any purchases being made under these circumstances.

Frequent travellers and shoppers can cut costs by opting for cards that have no foreign currency exchange fees. Many of these cards will also offer other travel benefits, including low to no ATM withdrawal fees.

4. Rewards

You may be a good customer, with regular spending and on-time payments. However, if the rewards that you were promised upon signing up still turn out to be elusive, it might be time to find a new card.

Rewards might take the form of travel miles, points, cash-back, gift vouchers, special offers and more. While these benefits might sound tempting, you most likely have to spend a significant amount on the card to be able to access them. Rewards credit cards also generally come with higher interest rates.

Are you thinking of finding a new credit card? Let us know in the comments.