Credit cards have become a daily part of life for many people. It's not a stretch to assume that some people use their cards multiple times a day. The question is, have you thought about switching cards?
Admittedly, the concept may seem weird to some people. If your current credit card is serving its purpose, why make a change? With so many options out there, it's in your best interest to shop around. Here's why.
The type of rewards may be better
Generally speaking, credit card rewards are broken down into two main categories: travel and cash back. Although those categories are easy to understand, no two cards are alike.
If you're interested in a travel credit card, you need to decide between airline or hotel rewards. Alternatively, you can earn fully flexible travel rewards, but you need to know how the redemption system works. For example, some programs allow you to apply your points to any type of travel you book while others only allow you to use your points when you book through their travel portal.
With cash back credit cards, what you get back is straightforward, but that doesn't mean you shouldn't compare what's available. Some cards give you more cash back on select categories, e.g. groceries and gas, while others may have a flat rate for all your purchases. You'll also want to know when your cash back pays out. That could be monthly, annually or when you hit a minimum threshold.
You mainly want to have a credit card where the earn rate lines up with your spending and the rewards you earn are beneficial to you.
You want the added benefits
Over the years, credit cards have added more benefits, so you may want to consider a switch. Although the sign up bonus isn't a recurring benefit, there are many offers where new applicants may get $200+ in points or increased cash back for a period of time. That alone is worth considering a switch.
When considering a new card, some of the benefits you should look for include:
● Travel insurance
● Mobile device insurance
● Roadside assistance
● Price protection
● Extended warranty
● Price protection
● No foreign transaction fees
● Lounge access
● Concierge service
You obviously won't get all of those benefits in a single card, so pick which ones are most important to you and see if any cards offer them. Any benefits you do get need to have a value higher than the annual fee for it to be worth it.
Your needs have changed
Although credit cards typically function the same way regardless of which card you're holding, your priorities could change over the years. For example, if you get a new job that requires frequent travel, you'll like want to get a travel credit card that gives you travel rewards and benefits. Alternatively, if you've been using a joint credit card, you may want to switch or get your own credit card since it'll help you build your credit score.
Keep in mind that the decision to switch credit cards shouldn't be based on rewards alone, sometimes it comes down to your financial situation. Those who have debt issues or are continually carrying a balance on their cards should consider a low interest credit card over any rewards card.
As the name implies, low interest cards give you a lower interest rate, which is 8.99-12.99%. That's considerably lower than the average of 19.99% that most cards charge. Best of all, when signing up for a low interest card, there's usually a balance transfer option where you'll pay 0-3.99% for a set period. This is an excellent opportunity to reduce your debt.
With hundreds of credit cards on the market, it may seem overwhelming to switch credit cards. Start by looking at your priorities and then see if there are any cards that line up with your spending. If there's an annual fee, make sure the benefits you get are worth more than you're paying. There's no need to switch cards constantly, but it doesn't hurt to shop around every so often.
Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.
Barry Choi is a paid spokesperson of Sonnet Insurance.