How to Switch Credit Cards

Whether you want a different rewards program or a lower interest rate, switching credit cards involves a bit of strategy. Applying for a new card and closing an account can both lower your credit score, but temporary dips might be worth it in the long run.^{[1]XResearch source} For instance, if you’re paying off debt at a high interest rate, transferring your balance to a low-interest card could help you save lots of money. Managing your lines of credit might take a little homework, but getting your finances in the best shape possible is worth the effort.

Part 1

Part 1 of 4:

Applying for a New Card

1
Shop around for a new card that fits your specific needs. Decide why you need a new card and what your new card needs to offer. Check out the rates and rewards of other cards that your current creditor offers, and browse cards offered by major banks and credit card companies. Compare potential new cards’ APR (interest rate), annual fees, and rewards (such as airline miles or cash back) with those of your current card.^{[2]XResearch source}
- Suppose you don’t anticipate traveling for a while; in that case, you'd want to switch from a miles reward program to a cash back program.
- If you figure out your specific needs first, you’ll know what to look for in a new card. That way, you’ll send fewer applications, which translates to fewer hard pulls on your credit report.^{[3]XResearch source}
2
Call your creditor to switch if you’re staying with the same company. Switching to another card offered by your creditor is usually a simple process, but it’ll likely require filing a new application. A customer service agent can explain your options and help you make the switch.^{[4]XResearch source}
- When you call, explain that you currently hold a card with them, but you’d prefer to carry another that offers different rewards or a better APR. Keep in mind you’ll have a better shot at negotiating if you have good credit and pay your monthly bill on time.^{[5]XResearch source}
- Even if it’s with the same company, filing a new application means a hard pull, which will temporarily decrease your credit score.
3
Get soft offers from new creditors before filling out an application. You can find out if a new creditor would approve you and which rates you’d pay without filing a hard application. When you shop for cards online, enter your information into a form that allows the creditor to do a soft inquiry, which doesn’t affect your credit score. They then let you know if you qualify for an offer.^{[6]XResearch source}
- You can also call creditors and ask about their minimum FICO credit score requirements.^{[7]XResearch source}
4
Open your new account before canceling the old card. When you find an offer that fits your needs, fill out and submit the application form. In almost all cases, you should wait until you’re accepted before canceling your current card.^{[8]XResearch source}
- Suppose your card has a hefty credit limit, and you close it when you submit your application. Canceling your current card will leave you with less available credit, and if you have any debt, your score will take a significant hit. That could cause the creditor to reject your application, leaving you with no lines of credit and a lower score.
Advertisement

Part 2

Part 2 of 4:

Transferring a Balance

1
Try to find a card with a limit greater than your balance. For example, if you have $5,000 in debt, try to find a balance transfer card with at least a $5,000 limit. Ideally, your new card’s limit will be greater than that of your old card.^{[9]XResearch source}
- Even if you can’t get a limit greater than your balance, it’s still wise to transfer as much money as possible to a card with a lower interest rate. Just make sure the new card’s final interest rate (which kicks in after the introductory rate expires) is less than your current card’s rate.
2
Make sure a balance transfer won’t cost more than your current interest. Almost all creditors charge a balance fee of at least 2.5 to 3 percent. Before making the switch, calculate the total interest you’d pay on your debt based on your current rate. Don’t make the switch if your transfer fee, new APR, and new annual fees would cost more than your current interest rate.^{[10]XResearch source}
- You can use this tool to calculate your total costs based on your current and new APR (interest rates), current and new annual fees, and balance transfer fee: https://www.creditcards.com/calculators/balance-transfer.php.
3
Remember that your new card’s introductory rate will expire. Your new card might have a 0 to 2 percent introductory interest rate, but that’ll expire in 6 to 12 months. Make sure to factor in the actual rate if you don’t plan on paying off your balance within that time.^{[11]XResearch source}
- For instance, if your current rate is 11 percent, but your new card’s final rate will be 14 percent, it’ll probably cost more to transfer your balance in the long run.
- You’ll probably need good credit to get a 0 to 2 percent introductory rate. If your score is under 660 or you can’t get a good offer, keep paying off your balance until your score improves.
4
Contact your new creditor to make the transfer. After deciding that a balance transfer will save you money, complete the card application on the creditor’s website, over the phone, or by submitting a paper form. When it’s approved, you can go to your new creditor’s website and fill out a balance transfer form. If you can’t find an online form, call your creditor’s customer service line.^{[12]XResearch source}
- You’ll input your old card number and account information. The new creditor will then contact the old card issuer, pay off the balance, and add the balance (along with the transfer fee) to your new card.
5
Keep the old account open. Canceling the old card after the balance transfer is complete could hurt your credit score. If you've had it for years, canceling it could shorten the length of your credit history. Additionally, lowering your total available credit could hurt your limit-to-balance ratio.^{[13]XResearch source}
- Keep the account open, but don’t make big purchases with your old card. If you need to make purchases to keep it active, set up an automatic recurring payment for an inexpensive bill, like a streaming service subscription. Pay the card's balance before your monthly deadline so you don’t accrue interest.^{[14]XResearch source}
6
Don’t make any purchases with your transfer card. New purchases will increase your balance, and your charges might be subject to the final interest rate, even you made them within the introductory period. To avoid confusion, cut up the new card so you don’t accidentally use it.^{[15]XResearch source}
- Your transfer card account only exists to pay off your credit card debt. Set up automatic payments with your creditor to pay off the balance. Even if you destroy your physical card, you’ll be able to access your account information online or via the customer service phone line.
7
Consider making another transfer after the low-interest rate expires. Do your best to pay off as much of your debt at the lowest possible interest rate. If you still have a balance after the introductory rate expires, you could transfer your debt to another low-interest card. Your credit score will take a hit, but it might be worth it in the long run.^{[16]XResearch source}
- Making transfers every 6 months will hurt your credit score temporarily. Increasing your overall credit limit while you pay off your balance will improve your limit-to-balance ratio and boost your score in the long-term.
- Further, you might find that paying balance transfer fees every 6 months is actually cheaper than paying off the balance on a card with a high interest rate.
8
Avoid carrying a balance in the future. If you carry a balance, your long-term goal should be to pay it off completely. Eventually, aim to pay off your credit card bill in full each month so you don’t accrue interest.^{[17]XResearch source}
- It’s a myth that accruing interest boosts your credit score. While creditors like making extra money off of interest payments, interest does not affect your score.
Advertisement

Part 3

Part 3 of 4:

Protecting Your Credit Score

1
Plan for a temporary dip in your credit score. Adding and closing lines of credit can slightly lower your credit score. If you have good credit and a long credit history, your score will likely dip by less than 5 points and bounce back within a couple of months. If you’re building your credit, your score might take a more substantial hit, but a temporarily lower score could fit into a long-term financial plan.^{[18]XResearch source}
- For example, when you open a new line of credit, the creditor does a credit check (known as a hard pull), which results in a short-term dip. However, a new line of credit can improve your limit-to-balance ratio (your total available credit compared to your debt balance), which plays a major role in determining your credit score.
- The more hard pulls creditors do, the more impact it has. You want to keep it under four hard pulls every 18 months.
- Additionally, if you’re paying off credit card debt, transferring your balance to a card with a lower interest rate can help you save money.
While dips in score due to switching cards are usually small and temporary, a decrease as small as 5 to 10 points could affect the interest rate of a mortgage or auto loan. For a major purchase like a house or car, even a slightly higher interest rate could cost you hundreds or thousands of dollars over the life of the loan.^{[19]XResearch source}
3
Check your credit utilization ratio before closing an account. Your credit utilization ratio, or limit-to-balance ratio, compares your total available credit with your balance owed. A ratio less than 10 percent is ideal, but your balance should never be more than 20 to 30 percent of your total available credit. The ratio accounts for almost a third of your credit score, so figure out how closing an account would affect it before making any moves.^{[20]XResearch source}
- For example, suppose you have 3 cards. The first has a limit of $2,000 with a $500 balance, the second has a limit of $5,000 with a $2,000 balance, and the third has a limit of $9,000 with no balance. Your ratio is 15.6 percent (the $2500 balance is 15.6 percent of your $16,000 total credit limit), which is good.
- However, canceling the card with a $9,000 limit would lower your available credit to $7,000. Your ratio would be 35.7 percent, which is bad, and your credit score would take a big hit.
4
Avoid closing an account that’s older than your other cards. The length of your credit history also plays a major role in determining your overall score. If you have one card that’s several years older than your others, keep it active unless it’s costing you too much money. If its APR and annual fees are too high, ask the issuer for better rates before canceling it.^{[21]XResearch source}
- Closed accounts in good standing have the same weight as open accounts for 7 to 10 years after the date they were closed. Suppose you had a single card for 10 years. If you close it, it’ll remain on your report for another 7 to 10 years. However, when it’s eventually removed from your report, your credit history will suddenly look a decade shorter.
Advertisement

Part 4

Part 4 of 4:

Closing Your Old Account

If you’ve racked up thousands of airline miles, ask your creditor what happens to your rewards if you cancel your card. Sometimes, rewards can be transferred or used within a given period of time after cancellation. Miles, cash back, and other rewards are real currency, so make sure you aren’t throwing money away by canceling the card.^{[22]XResearch source}
2
Pay off your old card’s balance if possible. An account can’t be closed unless the balance is paid in full or transferred to another creditor. If you have a small monthly balance, such as a hundred dollars, pay it off yourself unless your current APR (interest rate) is sky high.^{[23]XResearch source}
- If your balance is thousands of dollars, you could transfer the balance to a new card with a lower interest rate. You’ll be charged a balance transfer fee, which is usually at least 2.5 to 3 percent.
- Paying off a small balance at your old card's APR could end up costing a few more dollars, but you'll avoid the extra step of coordinating the transfer.
- Transferring a balance is worth it if the balance is high enough, your old card has a high interest rate, and the new card has a low transfer fee and 0 to 2 percent introductory APR. For instance, if your balance is $500, paying a 2 percent transfer fee and 2 percent interest is a lot cheaper than paying off the balance at a 20 percent interest rate.
If recurring automatic payments are charged to the card you cancel, you might find yourself behind on your bills. If necessary, switch your automatic payments to other accounts before canceling your card.^{[24]XResearch source}
4
Call your creditor to inform them you’re canceling your card. When you’re ready to cancel your card, break the news to your creditor over the phone first. Take the name of the customer service agent helping you, and ask them to confirm that your balance is 0. If you’re a customer in good standing, they’ll probably try to convince you to stay.^{[25]XResearch source}
- It might be worth your while to entertain any counter offers. Have your new card’s details in front of you so you can compare them with a counter offer.
- If you decide to go ahead and cancel the card, ask the customer service representative for a mailing address where you can send a written notice.
After your phone conversation, send a written notice to your creditor. Include your name, address, phone number, and account number. Inform them that you’re canceling the card, include details of your phone conversation (including the agent’s name), and ask them to send you a written confirmation of cancellation.^{[26]XResearch source}
It’ll take some time for the card to show up as closed on your credit report. If, after 1 to 2 months, you haven’t received a confirmation letter or the card is still marked open on your report, call the card issuer to report the mistake. You might have to repeat the cancellation process.^{[27]XResearch source}
Advertisement