Changing credit cards minus the stress
If you’re one of the thousands of credit cardholders who are stuck with a dud deal or the card is costing you too much and you’re just not satisfied well it’s time to make a stress free switch to a more worthy and valuable piece of plastic. The good news, changing credit cards isn’t a complicated process and with over 200 cards in Australia, there’s bound to be one to suit you.
Easy steps to switching credit cards
You’ve come to the conclusion that your current credit card is not for you and now’s the time to do something about it and make a switch. Follow these simple steps to ensure you make a smooth transition to a card that is the right fit for you.
- Step 1: Identify what you don’t like about your current credit card and pinpoint what features and benefits you want from a new card.
- Step 2: Find a better deal! This is easier than it sounds. Mozo can help you find the best credit card offers in Australia, click the link to compare over 195 credit cards from 58 banks.
- Step 3: If you have credit debt, make sure your new card has a great balance transfer offer. Most new providers can transfer your debt AND close the account for you. Too easy!
- Step 4: Before you kill off that old, evil credit card, check over your statements and make a list of all ongoing debits. (Being especially clever about more occasional payments like energy bills.)
Options when changing credit cards
Your reasons for changing credit cards will determine the type of card you are after. Here’s a list of your plastic options. Remember though, if you’re not good at managing debt than a credit card may not be for you!
- Balance transfer credit cards are ideal for people who have accumulated a substantial amount of debt with a high interest rate and are struggling to get out of the red. By switching to a balance transfer credit card you’ll move your existing credit card debt and receive low if not zero interest for a set period of between 3-24 months. You must take note of the interest free period if not you may end up getting stung!
- Feel like it’s time to be rewarded for all the spending you do? Are you well-disciplined and likely to pay off your credit card in full each month? If ‘yes’ than it could be the time to make a change and sign up to rewards credit card. Rewards credit cards have higher interest rates and annual fees than standard credit cards but you’ll receive, airline, supermarket and general rewards for your spending. Make sure you choose a rewards credit card that suits your spending habits and has benefits for the things you are interested in.
- Low interest rate credit card suits those people with little credit debt and those who are a little forgetful and unreliable when it comes to paying off their credit card in full each month. Most credit card providers offer a low interest rate card and it generally has interest rates of 14% p.a. or less.
- If you felt like you were being ripped off by your old credit card, paying a hefty annual fee consider switching to a low or no fee credit card. These cards are great if you’re likely to pay off your credit card in full each month as you’ll be rewarded with low or even no fees. Take note however, a no annual fee credit card may have higher interest rates and no reward scheme connected to it.
- Interest free credit card – These cards offer a means of borrowing money with an interest free period (3, 6 or 12 months) to repay it. Who doesn’t want a 0% interest rate on purchases! Learn more and compare interest free credit card deals here.
What to look for in a new credit card
To help you make a wise decision about which card you’re going to switch to, make sure you consider and have an understanding of the following features.
Fees are often part and parcel of being a credit cardholder. Before you change credit cards make sure you know which fees come with the new card you’re switching to, so you can factor them into your budget. Credit card fees include - annual fee, cash advance fee, late payment fee and overseas currency conversion fees. To learn more about fees, read Mozo’s guide onavoiding credit card fees.
A credit card limit refers to the maximum amount of funds a bank or financial institution will allow you to charge to the card. If you’re a big spender look into a platinum credit card, as they have much higher credit limits compared to a standard credit card. However high your credit limit is, don’t exceed it as your provider may hit you with a penalty. So it’s important to switch to a card that has a credit limit that you can stick to i.e. don’t borrow more than you can afford as it will cost you much more in the long run.
When shopping around for a credit card, it’s extremely important to look at the interest rate the provider will charge. A low interest rate is usually around 14% while some can be as high as 18%. How much interest you’ll pay will depend on the card you have, the purchases you make and when and how much you make in repayments.
If you’re considering changing to a rewards credit card have a thorough read of what you can redeem your reward points on. There’s no point choosing a credit card linked to an airline frequent flyer program if you have a fear of flying! Find a program that ties in with your interests. Get rewarded for your spending with frequent flyer miles, accommodation, cash back, shopping gift cards and more! As good as it may sounds, reward cards usually have higher interest rates and annual fees. Use the Mozo rewards revealer tool to find the best rewards card for what you’re interested in.
What you’ll need to apply for a credit card
If you’re changing credit cards but remaining with the same provider it’s unlikely you’ll have to go through the whole application process again. However if you’re switching to a new card provider, you’ll need to supply the following information.
- Proof of ID: Driver’s licence, passport, Medicare card or proof of age card
- Employer details: Name, address and phone number. If you’re self-employed you’ll need to provide your accountant's name and contact number
- Proof of income: Payslips and/or bank statements.
- Current financial commitments: Details of your spending, what you own and owe e.g. rent or loan repayments
How to close your old account
Before you get the scissors out and start shopping up your credit card make sure you follow these steps before shutting down your card for good.
1. Pay off your balance in full so it’s at zero. Do this before you inform your card provider as they may up the interest on you!
2. Redeem any rewards you may have accrued with a rewards credit card.
3. Pick up the phone and give your provider a call to find out the process of closing an account. It may be as simple as that one phone call.
4. To be on the safe side, write a cancellation letter to you bank asking to close the account also include the name of the account and the account number. As old school as this may sound, it’s best to be extra cautious in case the person you spoke to on the phone made an error.
5. Cancel any direct debits that were being paid using the credit card or otherwise the debits will still be charged to your account.