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4 Signs It's Time for a New Credit Card in the New Year

By Christy Bieber - Dec 18, 2020 at 10:00AM

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Could you have the wrong credit card in your wallet?

Smiling young couple with laptop open and credit card in hand.

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Credit cards can be a great tool to help you earn rewards and improve your credit score. But many people don't give them as much thought as they should. In fact, it's far too common for people to stick with their current card just because it's the one they've always used. 

The problem is, if your card isn't a good fit, you might not be getting the most value from it. Be on the lookout for these four signs it's time to get a new card in 2021. 

1. Your rewards don't match your spending

Most credit cards offer bonus rewards for certain kinds of purchases. But if you aren't spending much on the goods or services that net you the extra rewards, you might not be maximizing your miles, points, or cash back. 

Let's say your card provides a bonus 3% back on groceries, for example. If you eat out all the time and don't tend to spend much on food from the store, you may earn significantly more rewards by switching to a card that offers bonuses for dining out.

Credit card rewards earn you money or merchandise for buying things you'd purchase no matter what. This can help offset the cost of your spending. With so many great rewards cards out there, there's no reason to settle for one that isn't a good match. 

2. You aren't excited about using your rewards

Speaking of rewards, they really only have value if you use them. If you're earning miles and don't travel anymore, for example, you aren't really getting the best value from your card -- even if you're racking up free flights. 

In a worst-case scenario, your rewards could expire. Or you could lose them when you open a new credit card. But even if you retain them, you won't get much benefit if you aren't excited about what they can do for you.

Fortunately, just about anyone can find a rewards card that's well-matched to their desires. If you aren't interested in a card that gives you travel or merchandise, you can simply opt for a cash back card. That way, you can use the funds for anything you want. And who doesn't like getting free cash? 

3. You're paying a fee for perks that don't pay off

Some cards charge annual fees for the privilege of being a customer. There's nothing wrong with getting one of these -- as long as the card's perks are worth paying for

Many of the cards with the highest annual fees offer benefits such as access to airline lounges, free nights in hotels, or statement credits for using ride-sharing services. But you may not be using many of these perks given the current pandemic. 

And when life returns to normal, your circumstances may be changed. If you've had a child, for example, your days of hanging out in airline lounges before jetting around the world may be over for a while. 

If you're paying an annual fee, take the time to consider whether it's still worth it. If not, you may be able to downgrade your card to a free one without losing the account history on your credit report. 

4. You're carrying a balance on a card with a high APR

If you don't pay your card off in full every month, there's only one credit card feature that matters: Your annual percentage rate. That's because interest charges will dwarf any possible rewards you could earn. Interest will typically also cost you far more than the value of card perks.

If you carry a balance, think about moving it to a 0% APR balance transfer card. That way, you can reduce interest costs and hopefully pay off your debt sooner since more money will go to principal. Try to pay it off before the end of the interest-free period, and aim not to charge more than you can pay off going forward. 

Another way to avoid interest charges is to switch to a card with a 0% introductory rate. It's similar to a balance transfer card and means you won't pay interest on new purchases within the introductory period. These can be a good way to cover an emergency expense or a big purchase. But make sure you plan out how you're going to pay off the balance.

The bottom line is that even if you aren't paying interest, relying on cards to cover expenses could set you up for financial disaster. Try to rework your budget so that you can pay down your debt and look for ways to cut your expenses if necessary. In the long run, you don't want to charge more than you can cover during the billing cycle. 

Watch for these four signs to help you decide if 2021 is a good time to get a new card that's a better fit for you. If so, act quickly to get the most value from your card during the whole of next year.

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