Things to Consider While Upgrading Your Credit Card

Most people start their credit journey with an entry-level credit card that usually comes with basic features. However, as you progress in your career and your financial situation improves, your spending habits and lifestyle also change. Credit card features, which might have been suitable for you earlier, may not be equally valuable now. In such a situation, you may want to switch to a better credit card that is more suited to your spending preferences and gives better value. Now, for this, you can choose to apply for a new credit card or you can also get an upgrade on your existing card. With an upgrade, you need not close the entire card account with the issuer; instead, a different card is issued to you in its place, as per your application.

Before upgrading your credit card for better benefits, features and savings, let us first talk about a few important things to keep in mind:

Assess your Spending Pattern

Each credit card comes with a unique set of benefits and features that are targeted towards a certain group of card users based on their spending habits. For example, if you are a traveller, then you would need a card which offers travel benefit like complimentary lounge access, discount on hotel and flight bookings, etc. Similarly, if you often shop online, then you would need a card with accelerated rewards and offers on online spends. So, it is essential that you first assess your spending patterns to understand what products or services you spend the most on and then decide the purpose of your card upgrade.

Analyse card benefits

Before upgrading your card, you must check and analyse all its rewards and features and compare them with those provided by other similar cards in the market. This will help you decide whether it would be better to upgrade your card or apply for a new card from a different provider. The upgraded variant must come with benefits that would align with your lifestyle. Moreover, it is advisable to check whether the card comes with your preferred form of rewards, which can range from cashback, reward points, direct discount, air miles or some brand loyalty points. In case of credit card reward points, you should inquire about the redemption options and value of the points as well.

Related Read: Cash Back vs. Airline Miles

Consider the Annual Fee and Waiver Condition

If you choose a credit card with better benefits, the fees and charges associated with the upgraded card are likely to be higher. Along with the fee, many cards also come with spend-based fee waiver conditions. So, you must perform a cost-benefit analysis and take the renewed card annual fee and waiver condition into consideration to decide whether or not the upgrade would help you to maximise your savings while justifying the higher card fee. Ideally, the monetary value of the earned reward points, discounts and other offers should be more than the charges you will have to pay to use the credit card.

Aim for a Higher Credit Limit

While upgrading your credit card, you should also confirm about the credit limit that would come with your upgraded credit card. A credit card with better reward rate but a lower credit limit can lower your overall credit utilisation ratio, which may negatively affect your credit score as well. It is advisable to get an upgraded credit card with either a higher credit limit or at least with the same credit limit as your previous card to avoid any such negative consequences and to act as your back-up fund in case of emergency expenses.

It is important that you evaluate all the pros and cons of upgrading your credit card to a new one after reviewing the offers, features, fees and charges associated with the cards so that you make an informed decision. The benefits offered by the upgraded credit card should complement your lifestyle and spending habits and justify the fees charged. 

Sometimes merely getting a premium credit card does not ensure better savings, but rather a card with lower annual fee can also come with features better suited to your needs in which case a downgrade might make more sense for you.