5 things to know before switching credit cards

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Life changes, and so do your card needs.

The old travel rewards card that offered sweet deals 5 years ago is less appealing than the cash-back card

you really wish you had in your wallet. So can you ask the issuer to switch? Or are you better off just adding a new account from a new issuer?
If you want the cards you carry to fit your life now, here are 5 things you need to know.

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Before you apply, it pays to do a little reconnaissance, says John Breyault, vice president of public policy, telecommunications and fraud for the National Consumers League.
If you want the card for everyday purchases (like groceries and gas), do the places you frequent accept it? If the card is for travel, is it commonly accepted in the places you visit? Or by the airlines you fly?
And if it’s for a balance transfer, you may not be able to transfer the entire balance of the old card if the credit limit you’re offered is less than what you owe, says Linda Sherry, director of national priorities for Consumer Action.

“Your request for a new card so you can transfer that balance isn’t going to work,” she says.

What you should do: Explain what you need before you apply. “Make sure by calling back several times,” Sherry says. And “take names.”

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Want to swap a card for a more attractive option from the same issuer?

“I think you could call your issuer,” says Danielle Fagre Arlowe, senior vice president with the American Financial Services Association.

Explain that you have 1 card but would rather carry another, “and see what they say,” she says.

But “there’s no way to say what’s going to happen from a credit-scoring perspective,” she adds.

What you need to know: Your card issuers pull your credit regularly, and that doesn’t affect your score. But anytime you ask for something, like a credit-line increase or a new account, the issuer does a hard inquiry. And that can lower your score.

The rundown: If you have good credit, a lengthy history, and a number of accounts, it should shave only a few points, says Ethan Dornhelm, a principal scientist at Fair Isaac Corp., developer of the FICO score.

The smart move: Research and decide which card you want. And hold off entirely if you’re making a big-credit purchase, like a home or car, within the next 12 months. If you’re selective with applications, you can get what you want and minimize any potential score damage.

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Be prepared: Your issuer might not want to give you another card.

“If you have a $10,000 credit limit with one company, they may not want to give you another (card) with a large credit limit,” Sherry says.

And you could run into a similar attitude even with a different issuer if you already have plenty of available credit, she says.

“So take stock of what you have,” says Sherry, “because that is going to affect what they give you.”

And you may want to close some of the card accounts you’re not using, she says. “Because available credit is really what scares them.”

Pro tip: Avoid closing your oldest accounts, Sherry says. That long history helps your score.

Look at your available credit versus how much you’re using every month. That’s called your credit utilization ratio, and the lower that percentage, the better your score, Dornhelm says. So if closing accounts pushes the utilization ratio above 20% or 30%, that could actually hurt.

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It’s called a teaser rate: a temporarily lower rate that comes with a new card.

Federal law requires that a teaser rate last at least 6 months, Sherry says. But it can be withdrawn early if you’re more than 60 days late with a bill.

A card’s teaser rate won’t necessarily be the same rate that applies to balance transfers, which can have their own annual percentage rate, or APR, and their own teaser rate, Breyault says. “And once the promotional rate goes away, the regular rate can be quite high.”

Searching for a balance transfer card?

Do the math before you apply, Breyault says, by asking these questions:

What are all the mandatory fees (application fee, annual fee, balance transfer fee)?
What’s the balance transfer APR, and how long will it last?
How much would you pay each month to clear the balance before that rate expires?
What’s the total in fees and interest?
Also look at what happens if you can’t get it paid during the teaser-rate period, he says.

What’s the new rate? How much could you pay monthly, and how long would it take? What’s the total, including fees and interest?

Now you know the cost of that balance transfer and can comparison shop, Breyault says.

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Need a travel rewards card?

Miles are almost like a different form of currency, and the issuer or the airline decides what a mile is worth, Breyault says. “And those terms can change very quickly.”

One smart strategy: “Try to budget it out,” Breyault says. With your normal spending patterns, how many miles would you accumulate in a month, a quarter or year? What would those miles earn you, and how easy are they to use? And are you going to be able to use them in the near future?

If you’re trading a travel rewards card (or a card that gives any non-cash reward) for another card that better suits your life, it can pay to ask a few questions first, he says.

“If you’re going to close the miles card, what does that do to the miles you’ve accrued?” he asks. Do you lose them? Will they be accessible for a certain amount of time — and will that deadline suit you? Or can you get those miles transferred to another card?

“Those miles are really money in the bank for you, so the big question is what happens to them?” Breyault says. “Do you have to cash them out after a particular time?”

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