Dos and Don'ts of credit card switching
Switching from one credit card to another can be a sensible way of managing your finances.
One of the reasons that people switch cards is to take advantage of a 0% balance transfer rate on a new card. Doing so means that you will generally pay less over time, as you won't be charged interest on the balance you transfer, for the duration of the promotional offer.
You could also use switching in order to consolidate debt from a number of cards to just the one so that you can budget more easily.
Likewise, you may switch cards so you can take advantage of a 0% rate on purchases as well as the balance transfer rate.
Whatever your reasons, as tempting as switching cards may be, there are still a few things to keep in mind before making the leap.
- Compare offers. There are quite a few balance transfer and purchase cards in the market, so make sure you compare what is available before applying and what best suits your needs. You could consider which have the best deals on introductory rates, the length of promotional offers and, importantly, what the fees are for transferring balances. It is also worth considering what the APR will be after the promotional period, in case the balance isn't paid off by then.
- Do your sums. The point of switching is to make your financial situation a little easier. You probably don't want to fork out money for fees which effectively increases your level of debt. You need to carefully work out whether the cost of transferring is less than staying where you are, despite the higher interest rate you could be paying.
- Organise your payments. One of the plusses of switching is that moving your debt to a card with a 0% interest rate can give you some breathing space in clearing your balance. So, when you get your new card, consider whether you can you pay it off before the promotional period ends. Because if you still have a balance once that period is up, then your rate may jump to the standard APR.
- If you can help it, don't switch too often. Because of the fees you have to pay to switch, it can be costly if you keep doing it time and time again. This may well add to your overall financial burden not reduce it. If you can, aim to pay your balance off before the end of the introductory period.
- Try not to make lots of different applications for credit. Too many applications in a short space of time could impact your chances of getting credit further down the line.
Always keep in mind that you will be credit checked when you apply for a credit card. Ensure that you understand any lending criteria and check your credit score with a credit reference agency in advance to get an idea of where you stand, which can help avoid refusals. It's certainly worth visiting a price comparison website to look for cards which best suit your needs and see which ones you’re more likely to be accepted for.
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