How to decide when to dump your rewards card for another
By Randy Petersen
Randy Petersen is editor and publisher of Inside Flyer, which is
considered the leading publication in the world about frequent traveler programs. At CreditCards.com, he writes
Cashing In, a weekly feature in which he answers readers' questions about credit cards rewards programs.
Dear Cashing In,
I've had a decent air miles rewards card for about five
years, and got some decent deals out of it. But I see these new deals with
bonus rewards points for signing up. How do you know when to dump a rewards
card and get a new one? How often should I do it or should I do it at all? -- Rebecca
You are not alone. There are plenty of travelers, myself included, who
see bonuses of 30,000 to 45,000 miles for the same or similar credit card where,
just a few years ago, only offered 3,000 to 15,000 bonus miles. Chalk this up to
the extreme competitiveness of the credit card industry these days.
So when do you dump a rewards card? There are some people who dump their
rewards cards every six months or so, just to stay in the hunt for these
sign-up bonuses. I'm not a big fan of promoting that sort of activity as it
does carry potential penalties. First, you need to have really good credit if
you want to dump a rewards card these days. Plus, with the credit markets
changing, it may become very difficult for some to change cards and retain the
same credit limits they currently enjoy.
One of the most damaging things rewards credit
cardholders do is to apply for a card, get involved in earning and using the
rewards, but yet do not monitor their value. My general rule is to review my
rewards cards every two years.
Here are some basic guidelines to consider when deciding to dump a rewards card:
1) You find yourself unable or challenged to use the current rewards you
have earned. If the types of rewards you are trying to use just don't seem to
be available when it is most convenient for you, then perhaps you are in the
wrong program and another might better suit your needs.
2) You've changed your lifestyle and the types of rewards you enjoyed in
the past are no longer relevant. Here's an example: While everyone used to fawn
over earning frequent flier miles to circle the globe, any number of travelers
have been-there-and-done-that and are now looking for experiential rewards that
are not focused on travel. Yes, there are weary travelers out there who would
be enticed to use their miles to stay home.
3) Rule and term changes by the issuing bank no longer make the rewards
card the bonus financial instrument it once was. Examples include: If the bank increased
the foreign transaction fees on international purchases, altered your
interest rate by more than 1.5 percent or lowered your credit limit. These are all factors that may make changing a rewards card
a smart financial decision, and not at all tied into the actual rewards
4) There just happens to be a better card in the market now that just
wasn't there when you first applied for your current rewards card. Let's face
it, times change and offers change. These are all factors that bring new
products to the market. It does pay to be aware of what's new out there. It's
unfortunate, but I know far too many people who, when asked why they have the
current rewards card they have, can only say, "because
it's what I've always had."
If any of these situations apply to you, then it may be time to seek out
and get a new rewards card. But be careful and make sure you inspect all
the aspects (interest rate, penalty rates, etc.) of the new card before you
sign up. There's nothing worse than to switch
to another card just for the bonus miles and points, only to find out later
that you regret having made the change.
Plus, you need to consider the credit score impact of switching credit cards. Whenever
you apply for credit cards of any type, your credit
score will take a hit. Does this mean you shouldn't look at new rewards cards? Certainly not. Applying for one or two new cards will
affect your credit score, but depending on your overall credit health, only a
little. And with proper use of the new credit, you should be able to regain
that lost score over a short period of time. The effect will be noticeable, but
not damaging. What could cause more credit score damage, however, is if you
choose to cancel a rewards card that you've had a long time. Fifteen percent of
your credit score depends on the length of your credit history. My advice would
be to keep your oldest credit card and not cancel it, whether you use it or
Finally, on the subject of sign-up rewards bonuses. While some may be great,
I think it is better to concentrate on building rewards and protecting your
credit score rather than play "chase the bonus." Don't get me wrong
-- I'm all about big bonuses, but far too often I see cardholders with miles in
their eyes and have absolutely no idea about the benefits and use of the credit
card. Be smart. I'll take the right card over a one-time bonus any day, but
because of the competition, I'm finding I can get both at the same time.
The Wall Street Journal refers to Randy as "... the
most influential frequent flyer in America," while The New York Times tagged him "the world's leading expert on
airline frequent flier programs." Randy is editor and publisher of Inside Flyer magazine -- considered the leading publication in the world about frequent traveler programs. He is a regular speaker at
business travel seminars and conferences around the world; and is often called upon by the industry itself for
his comments and suggestions about the future of frequent traveler programs.
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