The reality is, most things will eventually be replaced by newer, brighter, shinier things. And it’s no different when it comes to credit cards. Although the decision to switch credit cards should be inspired by a little more than wanting a new or fancy-looking card.
Still, just because you’ve had a credit card for a while doesn’t mean there isn’t something newer and better out there. As long as competition exists among Canadian banks, there’ll always be a better credit card.
New credit cards come along regularly that have better interest rates, better perks, and better offers. When this happens, you might consider switching. In this piece, we’ll talk about how you can do that.
How to Switch your Credit Card
The good news is, switching your credit card in Canada is relatively simple. In just a few easy steps, you can have your credit card changed over:
Step 1: Find a new Credit Card
There’s no point in switching cards if you don’t reap the benefits in some way. So if you are not happy with your current card, you should do some research to select another one.
There are hundreds of different credit card options out there from different financial institutions, so don’t be afraid to shop around to find one that you like. You can compare cards in terms of:
- Interest rates. Different credit cards will offer different interest rates, and it’s never a bad idea to lower your interest rate if you can. Lowering your interest can help you decrease your monthly payments, as well as your overall debt.
- Benefits and Rewards. Different credit cards offer different types of rewards. President’s Choice Financial, for example, offers rewards in the form of points and money towards groceries. Air Miles Credit Cards, on the other hand, offer points in the form of Air Miles that can go towards flights and other flight related rewards. The card that is best for you really just depends on your personal interests and needs.
- Fees. Each type of credit card comes with it’s own benefits, downfalls, and fees. If you don’t like the fees that you are being charged on your current card, it’s okay to search for another one with less fees. Be sure to compare annual fees, as well as cash advance fees, reprinting fees, inactive account fees, over-the-limit fees, and so on and so forth.
Step 2: Contact your Card Issuer
There are two ways that you can go about getting a new credit card. Different companies generally offer different types of cards. So your first option is to stick with your current issuer, but request a change of card.
In some cases, your issuer may actually send you an invitation to switch, in which case you just follow the instructions on the invitation. But if you decide to switch to a new card on your own, contact the issuer of the card to discuss your options further.
Be sure to let them know that you would like to do a complete card transfer, transferring the balance from one card to another.
If you are choosing to go with a completely different company, your first step is to apply for your new credit card. Before applying you’ll want to make sure that you meet the card’s eligibility requirements so that you don’t waste your time.
You should also have all requested documents on hand and ready to go. If you are applying to change over your credit card, you’ll also want to make sure that you let them know the details of your existing credit card, including the details of your account and the dollar amount that is left owing.
The credit card company can then give you further instructions if necessary.
Step 3: Activate your New Card and Change over Pre-Authorized Payments
Once you’ve been accepted for your new card and it has been sent to you in the mail, double-check that your balance has been switched over. If all is good to go, activate your card.
If you have any pre-authorized payments that came off of your old credit card, you’ll also want to have them switched over as well. To do this, you’ll have to call each company individually to provide them with your new credit card information.
Step 4: Settle your Balance and Close your Old Account
If you don’t want to switch your balance over and just prefer to close it, do that once you have your new card activated. You’ll also want to be sure to call your old credit card company and close your account so that you don’t get charged any recurring annual or additional fees.
How Does Changing Credit Cards Affect Your Credit Score?
Is switching credit cards bad? The answer is dependent on some factors. When it comes to credit scores, most people simply think about credit payments. The belief is that if you make your payments on time, this will lead to a good credit score. And yes, this is somewhat true. Making your monthly payments on time definitely increases your credit score.
But there are many other factors that affect your credit as well. How long you have had your credit, for example, accounts for a significant portion of your credit score. The longer you’ve had your credit, the better your score.
For this reason, switching credit cards isn’t always the best idea. If you’ve had your credit card for a long time and switch to a new one, it could decrease your credit score.
With that being said, there are some ways around this, so it’s important to speak to your card issuer regarding this if it is a concern for you.
Another thing that impacts your credit score is your credit limit. Part of your credit score is determined by something called your “credit utilization”. This refers to the amount of credit that is used out of the credit that is available to you.
So if you increase your credit limit, your credit utilization is decreased, and your credit score is increased. So in this sense, switching credit cards can be beneficial to your overall score.
Of course, your credit score is also impacted by the number of inquiries on it. Each time you check your credit score, this can have a negative impact on your credit. Unfortunately, many credit cards do require a credit check.
If you are switching to another card with the same issuer, this probably won’t be a problem because they’ll already know your history with payments on the card. But if you are thinking about switching to another issuer, this may be something you want to consider.
There are some credit card companies out there that don’t require credit checks, but they may have higher interest rates.
In conclusion, you need to weigh your odds when selecting a new credit card. Switching cards can be beneficial in that you can reap new rewards or lower rates, and in some cases, it may even improve your credit score.
But switching can also have a negative impact on your credit score in some situations, so it’s not something that you want to do regularly. Find a card you love, make the switch, and build up the credit.