Most people begin their credit journey with an entry-level credit card. However, as their career progresses, their financial situation improves causing their spending and lifestyle habits to change. Thus, the entry-level credit cards, which were apt for them before might not be equally valuable in their current scenario. In such a case, they might want to go for a credit card that is more suitable for their spending preferences and offers them better value. For this, they can choose to apply for a new credit card or get an upgrade on their existing one. In case they choose to upgrade their existing credit card, they will not be required to close their credit card account with the issuer. Instead, the credit card provider will issue a different credit card in its place as per their application. However, before upgrading the credit card, card users should check out these few considerations:
Spending pattern
There are numerous credit cards available in the market. However, each comes with its own set of features and benefits targeting a certain group of card users based on their spending habits. So, if a card user prefers shopping online, then he/she would need a credit card that offers them accelerated rewards and offers on their online spends. Likewise, card users travelling often would require a credit card that offers them travel related benefits like complimentary lounge access, discounts on hotel bookings, etc. Hence, card users, before getting an upgrade on their existing credit card, should first assess their spending pattern. Doing so will help them know the products/services they spend the most on and then decide the purpose of their credit card upgrade.
Credit card benefits
Card users, before upgrading their credit cards, should also analyse its rewards and features and then compare it with those provided by other similar cards in the market. Doing so will help them decide if they should get a new credit card from a different card issuer or upgrade an existing one. If they choose to upgrade, they must ensure that the upgraded credit card’s features and benefits complement their spending habits. They should also check if their preferred credit card comes with their preferred form of value back such as cashback, reward points, brand loyalty points, etc. if their preferred form of value back is reward points, then they should also enquire about the redemption options and the value of the reward points.
Annual fee and waiver condition
Credit cards featuring better benefits are likely to have higher fees and charges than most of the entry-level credit cards. Many such credit cards may also have spend-based fee waiver conditions. Thus, card users must do a detailed cost-benefit analysis and factor in the renewed card annual fee and waiver condition when determining the net savings on upgrading their credit card. Ideally, the monetary value offered on reward points, discounts, offers, etc. should be more than the charges cardholders will have to pay to use the card.
Aim for a Higher Credit Limit
Before upgrading a credit card, cardholders should enquire about its credit limit. Having a credit card with better reward rate but a reduced credit limit can lower the overall credit utilisation ratio, which further can negatively affect the card user’s credit score. Hence, card users should try to get a higher credit limit on their upgraded card. Even if the card provider does not offer a higher credit limit, make sure that it isn’t lower than the previous credit card.
Word of Advice
For many, deciding whether or not to upgrade their existing credit card can be difficult. Due to their limited knowledge on the subject, they may even look for advice at various personal finance blogging sites like Finshastra or influencer video content on other platforms when all they need to do is simply evaluate all the pros and cons of upgrading their credit card and ensure that the benefits of their upgraded card compliment their lifestyle and spending habits. Also, remember that sometimes availing a premium credit card might not ensure better savings. Instead, a credit card with a lower annual fee might give you benefits that are better suited to your needs in which case downgrading the existing credit card would make more sense for you.