A new survey from CreditCards.com shows that 28% of cardholders have never changed their credit card, and another 12% have been using the same one for 10 years.
This could be a problem. A lot changes over the course of 10 years. Most people are bound to see significant shifts in their credit report and spending habits. Likewise, most credit cards make changes to their fees and rewards programs over the years, and card issuers are offering ever-more-exciting perks and sign-up bonuses.
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It's possible that you could save hundreds of dollars each year by switching up your credit card as your financial situation changes. Here's how.
If your credit score has increased...
Your credit score tends to increase with age, and you should be locking in lower interest rates as that happens.
How much difference can 10 years make? The average credit score for someone in their 20s is 652, while the average credit score for someone in their 30s is 671, according to FICO. This increase bumps you up into a credit score range considered "good," which can qualify you for low-interest credit cards and balance transfer offers.
Consider that the average American household has $7,136 of credit card debt (excluding those who don't own credit cards), and the average interest rate on a credit card as of April 2018 was 16.91%. Meanwhile, a relatively low interest rate will be about 3 percentage points less than the national average. Put the two together, and it's clear that lowering your interest rate could save you a lot of money.
The table below shows how much money the average American household would save by switching to a low-interest rate credit card with a 13% APR or a balance transfer card with a 0% introductory APR and a 3% balance transfer fee. This is assuming monthly payments of $350, which is enough to pay off the debt before the promotional period ends on a 21-month balance transfer offer.
| 16.91% interest rate | 13% interest rate | 0% interest rate | |
|---|---|---|---|
| Interest + fees paid | $1,336 | $971 | $214.08 |
| Time to pay off debt | 2.1 years | 2 years | 1.8 years |
Data Source: The Motley Fool credit card calculator.
Potential savings: $921.92
If your spending habits have changed...
Chances are you spend your money differently now than you did 10 years ago. Most credit card rewards programs offer extra points for certain spending categories, so a change in your spending habits might merit a change in your credit card rewards program.
For example, say you opened up a credit card ten years ago that offers 3x points on dining and travel and 1x points on groceries and gas. Back then, you ate out regularly and didn't have a car, so you spent $1,000 per month on dining and travel and only $100 per month on groceries and gas, netting you 37,200 points per year. Now you only spend $100 per month on dining and travel, but you spend $1,000 on groceries and gas, so you're down to 15,600 points per year.
Switching to a credit card that offers 3x points on groceries and gas and 1x points on dining and travel would get you back to 37,200 points per year. Given that the points in a good rewards program can be worth 1.5 cents or more, it's worth changing your credit card.
Potential savings: $324 per year -- i.e., the value of 21,600 extra points per year
If your credit card fees have changed...
Over time, you may have noticed fees on your credit card -- such as annual fees, late fees, interest rates, and international transaction fees -- slowly creeping upward.
Ten years ago, in 2008, the average credit card annual fee was $74. Now, it's reached $120. If you've held the same credit card for that long, there's a good chance that the rewards no longer offset the cost of the annual fee.
As interest rates continue to rise, asking for a lower interest rate or switching to a lower-interest rate credit card can save you a lot of money if you ever find yourself carrying a balance.
Finally, if you find yourself slammed with late fees, there are cards that have no late fees, and no annual fee. They even offer a 0% introductory APR.
Potential savings: Varies
If your rewards program has changed...
Credit card companies tend to tweak their rewards programs annually, and once in a while, they do a complete overhaul. While this can work to your benefit, more often than not, rewards points are devalued or become harder to redeem as more and more consumers take advantage of a generous rewards program.
For example, according to reward valuations from The Points Guy, Delta SkyMiles were worth 1.5 cents each in 2013. Now, as of April 2018, they are worth 1.2 cents each due to a series of earning changes and award chart devaluations.
Let's say you've spent enough money through the program to accumulate 20,000 points per year. The value of your annual rewards has gone down from $300 to $240 since 2013. At the same time, there are cards with points valued at $0.02 each, which would get you $400 per year in rewards from the same spending.
Potential savings: $160 per year
There's no question that your spending habits and preferences change over time, so it makes sense to change up your credit card loyalty as well. If you've been using the same credit card for 10 years, it's time to look into adding a new piece of plastic to your wallet.
