3 Questions To Ask Before Switching Credit Cards

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Last updated on August 27, 2019 Comments: 2

Credit card companies are smart. They know how to lure us, and they know how to keep us. But know this, the best value you’ll ever geat from your credit card company is when you first apply.

Want proof? Will your credit card company give you a 0% interest rate for 12 months on your credit card balance with them? Will your credit card company give you 25,000 miles as a thank you for your loyalty? How about an annual fee waiver for your devotion?

Now you will get reduced interest rates, retention bonuses and in some cases annual fee waivers if you spend enough. But they typically will never be as large as the ones when a credit card issuer first tries to lure you over.

That’s why we suggest playing the field. Nothing wrong in double checking to make sure you’re always getting the biggest bang for your buck from your credit card. Just make sure to ask yourself these 5 questions before making the switch to the best credit card for you:

1. What’s the benefit of leaving?

If you’re going to switch cards, make sure it’s for one of the following reasons:

  1. The rewards of the new card are more valuable to you – whether it be the signing bonus, ongoing spend or annual fee
  2. The rewards of the new card are more relevant to you – for example, if you don’t travel anymore, go cash back
  3. The rewards are more convenient for you – you find the new rewards program easier to use and redeem
  4. Stronger perks & benefits – the insurance package is better suited to your situation
  5. The interest rate is lower – whether it be on a balance transfer or new spend

2. What’s the cost of leaving?

This one’s tricky. Issuers set-up quite a few hurdles making it hard to churn credit cards. For example, while plenty of credit card issuers advertise that your points will never expire, if you read the fine print, most require that your credit card remain open. Close your account and your Avion and Aventura points  disapear within 60-90 days! With an Aeroplan or Air Miles credit card on the other hand, if you close your credit card account, your points will stay active so long as the Aeroplan or Air Miles loyalty account stays active.

Closing a credit card account will not impact your credit rating on its own. However, if you do carry a balance, make sure that closing your credit card account, won’t reduce your total credit lines outstanding, such that your debt exceeds 30% of your total lines. Chances are if you’re opening a new creidt card, your new line should replace your old line.

3. Are there hidden fees or terms?

Transparency is not a credit card companies friend. That said, Canadian regulators now require all credit card applications to contain the same information in a very clear and easy to understand format called the Schumer Box at the beginning of every credit card application. Look out for the following:

  1. The card’s annual fee (if at all)
  2. The card’s interest rate (balance transfers, new purchases, cash advance and penalty rate if you’re late)
  3. The card’s right to change your interest rate at the credit card company’s discretion (PC MasterCard and Canadian Tire)
  4. The cost of a balance transfer (the intro rate, and the balance transfer fee ranges from 0% to 3%)
  5. Foreign exchange fees (range from 0% to 3%)
  6. Supplementary card fees (range from $0 to the same annual fee as the primary cardholder)

So remember, play the field. Flirt and date, and when you find the right fit, go for it. From our perspective, you’re likely to get the largest economic benefit from a credit card’s sign-up bonus. Think about, a 25,000 point sign-up bonus, on a card that offer 1 point per dollar spent, would take $25,000 of spend to achieve. However, when you sign-up for the card, it’s given to you for free! That’s a bank beating strategy.

Author Bio

GreedyRates is Canada’s go-to resource for all things personal finance. Our expert articles and videos cover every topic under the financial sun, including credit cards, credit scores, loans, bank accounts, budgeting, investing, RSPs, TFSAs, GICs, taxes, and more. Want our advice on a personal finance issue? Send us an email at [email protected] and we’ll gladly give you some free tips.

Article comments

Ak says:

Hi, I urgently need good consel. I have just moved to Canada and I let some random customer service agent at the bank sign me up for the bank’s credit card. I’ve now reviewed the fine print & the benefits are horrible. I’ve identified another credit card vy another vendor I want to sign up for.
Question- should I go ahead and cancel the 1st credit card? I haven’t used it since last month or should I switch to the lowest card on this bank’s listing, and go ahead and get the actual credit card I want? Please advise

The GreedyRates Team says:

Hello AK,

Welcome to Canada! We’re glad that you’re already getting integrated into the Canadian banking system, but it is unfortunate that your new bank has saddled you with a card you don’t like. As a new resident, it’s important that you start building credit as soon as possible, so we understand the bank’s sentiment, and it’s nice you already have credit. The thing is, if you’re already being approved for unsecured cards then you deserve your choice between them. The scope of your choice largely depends on how the banking system sees your credit, however.

If you don’t have a Canadian credit score yet, your bank is the only Canadian bank that “knows” you, so we’d suggest sticking with the card that they gave originally. You might be able to ask them for an upgrade to one of their better credit cards. If you don’t have a credit score with Equifax or TransUnion yet, then it will be harder to get approved for other cards from other banks. With a secured card like the Refresh Financial Secured Visa, you don’t need a credit score, and can simply put down a deposit in cash for an equal credit limit. It’ll also help you boost your score faster.

If you already have a good score, disregard this and feel free to apply for whatever card you want. Regardless, you don’t need to cancel your current credit card. Having multiple open credit cards, as long as they’re paid on time, means you’re able to maintain a healthy credit utilization ratio and raise your score accordingly. In the meantime, let us know what cards you’re interested in and we’ll be happy to recommend you something better!