A guide to switching credit cards

Why might it be a good idea to change credit cards?

There are a number of reasons why you might want to change credit cards. For example, if you:

• Are paying interest on your current credit card but could move to a 0% deal

• Have a card that doesn’t give you anything back – no perks, no rewards

• Are planning for an upcoming big expense and your existing card doesn’t have a high enough limit

• Want to simplify your finances by consolidating debt

• Have improved your credit score and think you might now qualify for better rates, terms and limits

• Will be travelling and want to avoid overseas fees

What are the pros and cons of switching credit cards?

Switching credit cards could help you to stay on top of your spending, but whether it’s right for you will depend on your circumstances.

Pros

Switching credit cards can be a smart financial move if you can:

• Get rewards for spending, such as cashback, vouchers or air miles(but bear in mind rewards cards typically have high interest rates, meaning they're only worth it if you clear your balance in full each month)

• Take advantage of a 0% promotional deal on purchases or balance transfers (or both)

• Shift existing debt from multiple cards to a single card, to benefit from a better rate of interest and make repayments simpler

Cons

Keep in mind that there can be potential downsides to switching credit cards:

• A hard credit check is carried out by the lender when you apply for a new card, which can cause your credit score to dip in the short term

• Introductory offers don’t last forever. Once a 0% interest deal ends, the standard rate (often much higher) usually kicks in

• If you’re doing a balance transfer, you'll often have to pay a transfer fee. This is typically 2-4% of the amount you move

• Your new card could have a lower credit limit than your old one. This could affect your credit utilisation ratio (the percentage of available credit you use) and have an impact on your credit score

• You may not be eligible for the best deals if you don’t have an excellent credit score.

What to consider when switching credit cards

If you’re thinking of switching credit cards, it’s worth asking yourself the following questions:

Is there a balance transfer fee?

If you’re planning to move existing debt to a zero interest balance transfer card, be aware that many providers charge a transfer fee (usually 2-4%).

Some cards come with no fee at all, but you might find the interest-free period is shorter. Compare both aspects of the offer to see which deals save you the most overall.

What’s the credit limit?

Your new card’s credit limit is the maximum amount you can borrow. If you’re switching to move over an existing balance, check the limit is high enough to cover it.

Say you owe £1,500 on your old card. If your new card only gives you a £1,200 limit, you won’t be able to transfer the full amount. You might still save money by switching part of the existing balance, but it means managing two different sets of repayments until the original debt is cleared.

Also, watch your credit utilisation. Ideally, you don’t want to use more than 30% of your total available credit.

Whatever credit limit you have, avoid spending over it. If you do, it can lead to:

• An overlimit fee (usually £12)

• Damage to your credit score

• Potential loss of any promotional interest rate.

Can you keep up with the repayments?

Whether you’re switching for a better interest rate or rewards, the golden rule stays the same: try and clear your card balance in full each month or – at the very least – make the minimum payment. Miss your monthly payment and you could:

• Lose your 0% interest rate

• Be hit with a £12 late payment fee

• Hurt your credit score

If you’ve got a promotional 0% deal, aim to clear the full balance before the offer ends. At this point, the higher standard interest rate then applies to what you owe on the card.

Is a new card the right option?

Switching is only a good idea if it improves your financial situation, so don’t jump in without doing your sums first.

Depending on how much credit you need and how long you’ll take to repay it, a personal loan or overdraft might work out cheaper or easier to manage.

Also, consider the impact of your spending habits. If you’re switching cards just for the perks but tend to leave an outstanding balance on your card each month, you may end up paying more in interest than the rewards are worth.

How to change your credit card in six steps

If you’ve weighed up your options and are ready to switch cards, follow these six steps:

1. Work out what you need from a new card

Before you start comparing deals, think about why you want to switch your card. For example, is it to:

• Take advantage of an introductory offer

• Consolidate your debts, or

• Benefit from cashback or rewards?

Knowing your goal will make it easier to find the right fit. It may help to look at the types of credit card we compare so you can narrow down your options.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

2. Check your credit score

A healthy credit score can unlock better card deals, so look at yours to see if there’s anything you can do to improve your credit score before you apply.

Equifax, Experian, and TransUnion are the three main credit reference agencies in the UK that offer free credit score checks.

Spotted something on your report that doesn’t look right? Flag it to both the credit reference agency and the lender who reported it.

3. See which cards you’re eligible for and do a quick cost check

Once you know which type of credit card you’d like to apply for, it can be a good idea to use our eligibility checker. This will show you the cards you’re most likely to be accepted for, without affecting your credit score.

You can compare interest rates as well as any rewards or other benefits, to find the right card for you. Before you tap ‘apply’, be sure you know the rates on your card. Look at:

• The APR (annual percentage rate) – this shows the yearly cost of borrowing, including interest and any fees. This is a representative rate that 51% who apply will get, but it’s not guaranteed. You’ll only know your actual rate when you formally apply.

• The introductory rate – if the card has one, check how long it lasts and what the ‘go to’ rate will be after the promotional period ends.

4. Apply for the card

Found the right card? Go ahead and apply. If you compare with us, you’ll be taken straight to the provider’s website with the click of a button.

5. Activate your new card and transfer your balance (if needed)

Once you’re approved, your new card should usually land on your doormat within 10 working days.

• When it arrives, simply follow the set-up instructions. You can usually activate your card via online banking, by phone or in a branch.

• You might also like to set up a direct debit to make sure you don’t miss a payment.

If you’re doing a balance transfer, you’ll often be asked for your old card details during the application stage. Your provider will then complete the transfer for you once the card is activated.

If none of this has happened, don’t worry, as you can usually do the transfer later through your new provider’s online banking or app. Just check whether there’s a deadline you need to do it by in order to qualify for any promotional rates.

6. Decide what to do with your old card

Now that your new card’s up and running, you’ll need to decide whether to cancel your old card.​​​

Closing your old card:

• Reduces the risk of identity fraud

• Removes the temptation to spend on it again

• Could cause a temporary dip in your credit score, especially if your old card had been managed well over a long period of time.

If you’ve switched to a new card with a lower credit limit, your credit utilisation ratio might increase.

Having less spare credit could lower your credit score. Bear this in mind, particularly if your credit score is low.

When should I avoid switching credit cards?

If you’re planning to apply for a mortgage or loan in the next 12 months, it might be best to hold off switching credit cards for the time being. ​​

Every credit application you make will temporarily lower your credit score. So it won’t help to make too many applications in a short space of time.

A lower credit score can affect your chances of securing credit or mean you’re offered higher interest rates. And it’s a good idea not to change your credit card too often. Lenders are reassured by well-managed, longstanding accounts.