Switching credit cards can be a great way to get out of debt faster, or to get rewarded for your spending. In this guide, we’ll take a look at some reasons why switching credit cards could help you better manage your money, depending on your personal financial situation. If you’re thinking about switching, we’ll tell you how Canstar’s credit card finder tool can help you to compare your options.
1 Do you owe a running balance?
Having a credit card can be a really useful payment tool, but not if you just keep racking up interest. If you have a credit card balance that you’re continually carrying over, then it might be time to review not only your spending habits, but also whether there’s a lower interest option available. If this sounds like you, you can compare low rate credit cards on Canstar’s website.
2 Is your card’s interest rate less than 15%?
Continuing on from the point above, the rate you pay on your credit card can make a huge difference to how much you pay on your debt. It goes without saying that, the less interest you pay, the more likely you are to get on top of ongoing debt at a faster rate. There are many credit cards available in New Zealand that have a purchase rate of less than 15%, so keep that in mind when you start your credit card search. If you know you regularly have rollover debt – and the interest rate on your current card is 15% or higher – it could be worth considering switching.
3 Did you sign up for your card because of its rewards?
Rewards credit cards tend to have a higher interest rate than other types of cards. If you currently owe money on your card, check whether the rewards you get are worth more than what you’re paying in interest on the card. Credit card rewards can be great, but they come at the cost of higher interest rates and, generally, a higher annual fee, too.
If you want to know more about the different types of credit cards and how they can match up with different spending profiles, check out Canstar’s earlier guide, below.
4 Did you originally sign up for a 0% introductory rate?
A credit card balance transfer is when you transfer your existing credit card debt to a new credit card offering a lower interest rate for a certain period of time. The aim is to completely pay off your credit card debt during that low interest rate period. If you have used a credit card balance transfer in the past, then you’ll already be familiar with switching credit cards. Introductory rates are close to, or at 0%, which can be good if you’re using them to pay off your debt.
However, if you don’t pay off the debt before the end of the promotional period, you will get charged a higher interest rate. The revert rate on balance transfers – the interest rate that your new credit card reverts to once the introductory rate is finished – can be shockingly high.
If the introductory period on your credit card has lapsed – and you are now on a significantly higher interest rate (as mentioned, this is often the case with balance transfer credit cards) then it could be time to consider switching your card again, to one with a lower interest rate.
5 Credit card checker: use Canstar to compare your options
A credit card switch will not make sense for everyone. You might already be signed up to a credit card that meets your financial need. In that case, by all means, stay put with the card you have! However, it still makes sense to have a look from time to time at the options out there. That way you can check your credit card still works for you, or if there’s a new better option. Every year, Canstar releases its credit card ratings and awards, to see how providers and products stack up with rates, fees and features. Cards are reviewed according to spending profiles: low rate, low fee, flight rewards and rewards, to help you narrow down your options. To find out more on all these credit card types, as well as which providers and products are the standout performers, check out Canstar’s credit card section, below.