Credit Card Wisdom: Should I Stay Or Should I Go?

Yeah, sort of like that song from the Clash way back in 1981, it might be a good time for you to take a good hard look at those credit cards you have been carrying around in your wallet for ages.

Why Now?

In the off chance you haven’t noticed, it seems like the big credit card providers are pulling out all the stops to bring in new customers. Translation: this could be a good deal for you. That being said, there are a few details to be aware of if you are in the market for new plastic.

Do Your Homework

Really, it all begins with doing your homework. Side note: Have you noticed how often this theme comes up? Anyway, doing your homework starts with pulling out your current plastic. While you are doing that, go ahead and dig out those terms and conditions. If you can’t find them or you don’t feel like searching for them, your credit card provider may provide a link to your terms on their website.

Once you have your terms out in front of you, set yourself up a simple chart so you can see at a glance what you have. For example, you could have a column for interest rate, a column for balance transfer fees. Make sure you remember to add in whatever points or rewards that card gives you back in return. This will make comparisons with other cards super easy.

The Search

Now you can begin your hunt. Hey, even if you decide to stick with what you have, the exercise above is invaluable for your own understanding. So go ahead and pull on your Sherlock Holmes hat and begin your search. Obviously, like everyone else, you will most likely begin with Google. That’s fine as far as it goes, but there’s a lot of crap out there.

Be very careful when you chance upon credit card comparison sites. Many of these are “sponsored” (that means paid for by a specific credit card company). A better comparison site to check out is www.bankrate.com.

What are you looking for?

Exactly the same stuff you recorded up above for your own credit cards. This should go much faster since the credit card rating sites will provide much of this information right up front for you to see.

Another Research Pointer

One final thing to keep in mind when doing your research is your current credit card companies. That’s right, after you have done the research on what’s out there, you want to speak to your own credit card company. Maybe they will give you a better deal or maybe they won’t. You won’t know for sure until you pick up the phone and call them. Tell them that you have found another credit card that has better terms, and you want to know if they can match or beat those terms. Whatever the answer is, now you know.

Overlooked Stuff

One often overlooked area you don’t want to neglect examining is rewards qualifications. You see, on the surface, you may find a credit card company promoting what looks like fantastic rewards. But, and this is a big BUT, take a look a the fine print. Yes, that part of the Terms and Agreements that’s written in something like a 2-point font. If you pull out your magnifying glass, you may be shocked to learn that you have to spend a certain amount per month or per quarter to qualify for the rewards.

A Rewards Card Example

Here, take a look at this real world example. Suppose you get a nice shiny envelope from BigBank offering you a low interest rate credit card with up to 5% cash back. Hmmm, you think to yourself. That sounds pretty cool. The interest rate is about the same as one of the credit cards in your wallet, and you will get cash back every quarter.

Really? Maybe you will, then again maybe you won’t. Suppose you are the type of person who puts about $2,200 every month on the plastic. And further suppose that you pay all or most of it off each and every month. How much extra cash do you end up with? None, like as in big fat zero!

But why? In our example, the credit card offered by BigBank only ever pays cash back on purchases above $3,000 a month. Ouch! That stings. You get the point, make sure you do your homework before you switch.

In conclusion sometimes it pays to switch your credit card, and sometimes it doesn’t. You won’t know though until you start doing your own homework. Even if you decide to start using a new credit card (or cards), don’t close your old accounts. Closing accounts shortens your credit history, which can have a negative impact on your credit.

What about You?

Now its your turn? Have you considered any of those new credit card offers that are showing up in your mailbox?

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