How often Should You Switch Credit Cards?
Switching credit cards is something that we can often be advised to do. This could be for a variety of reasons, but is it something that we should consider doing often?
One main reason for switching anything is the cost. If you are on a 0% credit card, for example, it could be worth switching to another 0% card once the interest free period ends, to continue taking advantage of this free debt. Of course, there will be fees for switching and you will need to calculate whether these are worth paying or if you would be better off with a different option. Even if you are not using a 0% card you may compare the rates regularly and switch cards if you feel that you can get a better deal elsewhere. This can save a lot of money, but it will take time to do the research and so you need to consider how much your time is worth. It can depend on how much you owe on your card as to how much money you will save.
Some people do worry that if you keep applying for credit, as you do when you apply for a new credit card, it will have a negative impact on your credit record which could make it more difficult to borrow in the future. This is something that is worth thinking about, but it is worth noting that it is only if you get turned down for credit and you keep applying a lot in a short period that it may cause lenders to think that you are desperate for money and therefore maybe not someone they want to lend to. If you make all of your debt repayments and pay your rent or mortgage and bills all on time then this will show that you are capable of making payments and therefore unlikely to be in financial difficulty. There are other factors too which affect your credit record such as how much you earn and how secure your job is, so it does not all depend on how often you switch credit cards.
It is wise though to be really sure when you are switching cards. Make sure that you know how much you will pay to switch. You may have to pay fees and if you transfer the balance there is always a fee and you may even be charged higher interest of transferred balances than any new spending you do on the card Check the terms carefully and if you do not want to read the terms and conditions, telephone the customer services and ask them to clarify exactly what you would be charged in that situation so that you have a full understanding before you switch. Even for those that are used to this terminology, it can easy to miss a small point that could mean that you end up paying out more than you expected.
Although switching credit cards could be a good way to save money and transferring between 0% interest cards could even make you money, it is wise to be careful with this sort of debt. Credit card debt is one of the most expensive and as there is no necessity to pay off more than the minimum balance, then it can be easy to let the costs pile up. Although switching can save money, which means that the debt will not pile up so quickly, it is still wise to think hard about how you will pay it back as well. You may have a plan in place and once you can no longer switch to another 0% card have savings ready to pay it off. However, it can be easy to not plan for repayment and it is really important.
If you have 0% interest then it is wise to save up the money needed to pay off the balance. Then if you cannot switch to another 0% card you will be able to pay it off and not go onto an expensive rate. Try to put some money aside regularly and it should build up so that you will have a lump sum to pay it off. You could work out when the free period expires and therefore how much you will have to save each month in order to pay it off and budget accordingly so you know that you have enough.
If you do not have a zero interest card then you should pay any spare money you have straight onto the card. This will mean that when the interest is calculated, there will be less money outstanding and therefore you will pay less. You can pay chunks off whenever you like so it is wise to use any savings you have and any spare money to do this so that you can eliminate the debt as soon as possible.