How to Properly Change Your Credit Card
Master the complete process of transitioning your credit card, from selecting a new one to managing existing accounts effectively.
Changing a credit card involves transitioning to a different financial product, whether with a new issuer or a new card type. Understanding how to navigate this change effectively is an important aspect of managing personal finances.
Preparing for a Credit Card Change
Before applying for a new credit card, assess your financial standing and objectives. Evaluate your spending habits, existing debts, and what you hope to achieve, such as earning rewards, consolidating debt, or lowering interest rates. Compare features, fees, and terms, including annual fees that can range from $50 to over $800 for premium cards. Various types of credit cards are available, including those offering cashback, travel points, introductory 0% Annual Percentage Rate (APR) on purchases or balance transfers, and secured cards designed for building credit.
Checking your credit score is important before applying. Your credit score, a numerical representation of creditworthiness, with common ranges defining scores as fair (above 650), good (above 700), or excellent (above 750). This score significantly influences the likelihood of approval and the interest rate you might receive. You can obtain a free copy of your credit report from each of the three major nationwide consumer reporting companies—Equifax, Experian, and TransUnion—annually through AnnualCreditReport.com. Payment history (35% of your FICO Score) and amounts owed (30%) heavily influence this number.
Gathering necessary personal and financial information beforehand streamlines the application process. Applications typically require your full legal name, current address, date of birth, Social Security Number or Individual Taxpayer Identification Number, employment status, annual gross income from all reliable sources, and housing costs. Having this information prevents delays.
Applying for a New Credit Card
Submit your credit card application online, in person at a bank branch, or by mail. Online applications are quick. Accurately input the personal and financial data gathered during preparation.
After submission, outcomes vary. Some online applications result in instant approval or denial if your financial profile meets the issuer’s criteria.
Many applications enter a pending review status, meaning the lender needs additional time to assess the information provided. This review can take a few days, or up to two weeks. If under review, you may be contacted for verification or documentation, such as proof of income. Respond promptly to avoid delays.
Transitioning to Your New Card
Upon approval and receipt, activate your new credit card. This process involves a quick phone call to a toll-free number or clicks on the issuer’s website, often requiring personal detail verification. Activating the card ensures it is ready for use and helps protect against unauthorized transactions.
Update all recurring payments and subscriptions linked to your old card. This includes streaming platforms, utility bills, insurance premiums, and online shopping accounts. Carefully review past bank statements to identify automatic charges, preventing service interruptions or potential late fees. This meticulous process helps maintain financial stability and avoids unexpected payment failures.
If the new card is intended to consolidate debt, initiate a balance transfer. This moves outstanding balances from old cards to the new one, often with an introductory 0% APR for 12 to 21 months or longer. Most balance transfers incur a fee, typically 3% to 5% of the transferred amount, with some having a minimum of $5 or $10. This fee is usually added to the transferred balance.
Set up online access and alerts for your new card. Most issuers offer online portals to monitor transactions, make payments, and configure alerts for activities like large purchases, international transactions, or payment due dates. These alerts help you stay informed about your account activity and avoid missed payments.
Managing Your Old Credit Card
Deciding the fate of your old credit card involves considering several factors. Keeping an older account open, especially if it has a long history, can be beneficial for your credit score. The length of your credit history accounts for 15% of your FICO Score, and closing an old account can reduce the average age of your credit accounts.
Another factor is your credit utilization ratio, the amount of credit you are using compared to your total available credit. This ratio makes up 30% of your FICO Score. Closing a credit card reduces your total available credit, which can increase your utilization ratio and potentially impact your score, particularly if you maintain balances on other cards. A lower utilization ratio, generally below 30%, is viewed favorably by lenders.
If you choose to close an old credit card account, several steps ensure a smooth process. Pay off any remaining balance completely. Contact the credit card issuer, typically by phone, to formally request the account closure. It is also advisable to request written confirmation of the closure for your records. Once the account is confirmed closed, safely destroy the physical card, perhaps by shredding it, to prevent any unauthorized use.