Finding the perfect credit card for you
The following is presented for informational purposes only and is not intended as credit repair.
We recently received a question from a reader asking what to do about an unsatisfactory credit card. They’ve had the card for more than a decade, but aren’t happy with the features and rewards associated with the account. Should they get a new card? Ditch the old card? And what about their credit score?
As we’ve discussed many times in this space, good credit takes work. But once you’ve put in that work, the reward is the right to be a bit choosey about the credit products you use. So if you’re unsatisfied with the credit cards in your wallet right now, here’s what you do:
Research your options
Markets change. As financial fortunes rise and fall, the kinds of perks and terms credit card companies are willing to offer will change continuously. So, if you feel like your current credit card isn’t offering what you want or what you deserve, do some research. See what’s out there. You can use an aggregation site like Credit.com or go directly to each creditor and see what they have to offer.
Decide on your priorities
Your research should give you a little perspective on what features are available and help you complete the next step – prioritizing which of those features is most important to you. Low APR? Cash back? Rewards? Miles? A lack of fees?
How you tend to use your credit card will be the biggest factor. Do you take a lot of business trips? Do you pay off your balance every month or let it roll for a while? Do you use credit often or only occasionally? Once you know yourself, you should be able to see the sorts of credit card features that would most benefit you.
Talk to your current creditor
Having a long-standing credit card account is beneficial to your credit history, because how long your accounts have been open is a factor in your credit score. Therefore, having an old account in good standing is very much a positive, and you shouldn’t take closing that account lightly.
So if you’re unhappy with the terms of your account, you should at least attempt to see if your creditor can do anything for you. Maybe they can, maybe they can’t. You won’t know until you ask. But if you can find a way to keep an old account open (and you happy), it’s worth your time. Just remember what your priorities are, as you may not be able to get everything you want.
Be judicious when applying
Every time you apply for credit, your credit report is pulled for the purpose of examining your history and determining your creditworthiness. These “hard pulls” can have a negative (though usually temporary) impact on your credit score.
If you’ve decided to pursue a new credit card, don’t apply for a large number of accounts all at once. Ideally, you should just select the one card you’re interested in and apply for that, then wait to see if you’re approved. If not, move on to the next one.
If you find yourself being rejected multiple times, that’s a red flag indicating that either your credit score is too low for the types of cards you’re after, or there’s something else in your credit history that’s causing your applications to be denied. Fortunately, every time you’re rejected for credit, lenders are required to send you a letter explaining which credit report they reviewed and why you were ultimately rejected.
Weigh the benefits and risks of closing old accounts
So assuming you’ve opened a new account and you’re happy with it, what about the old account?
Generally speaking, your best bet is usually going to be to keep the old account open. It’s been stated before that the ideal number of credit cards is around three to four, but having more than that won’t necessarily hurt your credit score. So it’s a matter of understanding the risk and the reward of closing that old account.
Is there a fee? Is it causing you harm or costing you money to keep the account open? If there are consequences for keeping the card, you may want to go ahead and close it – just recognize that your credit score will likely experience a dip as a result. As long as your other accounts remain in good standing, however, you’ll eventually be able to recover whatever ground you lost, so ultimately it comes down to whatever you feel is best for you.