Credit card usage has seen a significant increase in recent years as the world transitioned into cashless transactions. Credit cards have made lives easier for many, bringing in the ease of payments and the benefits of “buy now, pay later”. Individuals that use the cards prudently and maintain timely bill payments are more likely to enjoy maximum rewards and benefits of credit cards offered by these financial instruments.
Banks offering credit cards decide the credit limits as per the user’s financial profile to keep the usage in check. The credit limit restriction sometimes becomes a reason for the cardholder to transfer to a new credit card. However, users must consider a few crucial factors before moving to another card.
Let us understand.
4 Reasons to Transfer to a New Credit Card
Interest Rate Consideration
Individuals with high credit card usage often carry a balance on their card, which keeps generating an APR. The annual percentage rate (APR) is the yearly interest accumulated on the sum you are spending on your card. With regular usage and the inability to pay the card in full every month, this interest keeps adding and becomes a financial liability. It is advisable to shift to another card with a lower or 0% APR (interest rates) in such a situation.
One can look for such credit card providers, and if the existing bank has such an offer, it is easier to transfer the card to a new APR without moving the balance to get a better, manageable interest rate on the card. Before shifting to another card, one must understand that they must arrange to close or transfer the balance on the previous card.
Manage the Credit Card Debt
For avid spenders, there comes a situation when the credit card debt is too high, and so is the interest charged on it. Some credit card providers offer 0% balance transfer services enabling the card users to transfer their balance on a new card. There is also a provision to pay the balance in 6 to 15 months with 0% APR charged. If one can approach such a provider offering a money transfer credit card, it is recommended and becomes an imperative reason to transfer to a new credit card.
A point worth remembering is that most credit card providers do not allow balance transfers through card upgrades with the same provider. In that case, the card user will have to transfer to another credit card issued by a different provider.
To Get Better Credit Utilisation Ratio
The credit utilisation ratio is the percentage of the credit used from the total credit line provided to the card user. Most credit card providers do not see it as a good practice if the CUR shows beyond 30% to 40% of the credit amount in a given credit cycle without any billing payments. The credit utilisation ratio above 30% also adversely affects the cardholder’s credit score. This becomes a reason to transfer to a new card. A new card with a higher credit limit also opens a new credit line with zero debt for the credit card user. However, shifting to a money transfer credit card with an enhanced credit line must not become the reason to use the card irresponsibly. The user will also have to close the previous credit balance to keep a healthy credit score.
Enhanced Card with Same Account
Another good reason to apply for a new credit card can be to get rid of the terms and conditions on the previous one the card user may not like. These terms could be the high annual fee, perks and rewards the user cannot utilise, the card not being usable at the specific places that the user intends, or the heavy penalties on late payments. It is an excellent strategy to transfer to a new credit card in this case; however, going for a different card with the same issuer will prove to be beneficial. The credit card provider may be willing to offer another product from their offerings while transferring your good credit history and points earned from the previous one. Transferring to the same issuer’s product also saves the hassle of undergoing credit checks and financial inquiries.
Transferring to a new card or applying with a better issuer is always a good idea, provided one holds valid reasons. When such a decision becomes imperative, it is important to choose the credit card providers offering attractive terms and conditions, handsome rewards and ease of balance transfer. The user must remember to use a credit card judicially to avoid accumulating debts, mounting interests and bad credit scores. Transfer to a credit card that meets your requirements and reap the benefits.
Santosh Kumar is a Professional SEO and Blogger, With the help of this blog he is trying to share top 10 lists, facts, entertainment news from India and all around the world.