Individuals mostly start their credit journey with very basic credit cards and build their credit score to become eligible for premium credit cards with higher credit limits. Some people are very quick in doing so and others take a long time. If you are also using a basic credit card and thinking of upgrading it, you need to keep a lot of things in mind. Don’t just go for a card upgrade that your card issuer offers you. Take your time and make a decision on the basis of different factors, which can help you get a card that suits you the best. Keep reading the article to understand the points that you must check before upgrading credit card:
Ways To Upgrade Your Credit Card
- Increasing The Credit Limit: You can upgrade your credit card by requesting a credit limit increase on the same card you are having.
- Getting a more premium credit card: You can get offers to upgrade your basic credit card to a premium credit card, which doesn’t only provide you with a higher limit but also with better benefits and rewards.
Points To Keep in Mind Before Upgrading Credit Card
Card issuers generally increase your credit limit when they offer you a credit card upgrade. But, you need to make sure that the limit that is being provided to you is enough for you to maintain a good (low) credit utilization ratio. To maintain a good credit score, you should use only 30% or less of your total credit limit, which is difficult to do with a basic credit card that comes with a lower credit limit. For example, if your credit limit was Rs. 50,000 and you were using 30,000 every month, your credit utilization ratio was 60%, which can affect your credit score badly. So, make sure that you are getting a credit limit of at least Rs. 1 lakh this time so that your credit utilization ratio becomes 30%, which will help you build your credit score.
Your Spending Habits
You should have a good idea about where you spend the most so that you can choose the best credit card for yourself. While upgrading your credit card, first analyze your spending habits and understand the categories where you spend the most. Then, you must check whether the card you are upgrading to, provides benefits in that particular category or not. There is no sense in upgrading to a premium card that comes with the best travel benefits if you are not a frequent traveler. If you love shopping or going to movies, you should upgrade to a card that provides shopping and movie benefits. If your current card is best suited for your requirements, there is no harm in having it even if it is a basic card. Just request a credit limit increase and enjoy the benefits of your card.
Rewards & Offers
Before upgrading to a card, you must check all the benefits and reward offers provided by that card. Check whether the offers and reward points will be advantageous for you or not. Most of the credit cards provide accelerated reward points and cashback on selected categories, so you need to make sure that you upgrade to a credit card that is most rewarding in the categories you spend the most on. You should also check for all the offers on that credit card and the card issuer’s reward portal before making any final decision.
Fees & Charges
Checking the fees and charges before upgrading credit cards is one of the most essential things to do. Don’t just look at the annual fee and make your decision. You should rather check for the detailed terms and conditions of the card you card upgrading to so that you don’t get surprised by any hidden charges later. Check for the interest charges, grace period, cash advance charges, etc. Also, before going for a card with a high annual fee, analyze wisely if paying that much amount for that particular credit card will be worth it or not. Sometimes credit cards with a low annual fee provide more exclusive benefits as compared to a credit card with a higher fee. So, be wise and responsible while making such decisions.
When you will apply for a new premium credit card, the card issuer will check your credit report to understand your creditworthiness, and this credit report check is known as a hard inquiry. Hard inquiries can have a negative effect on your credit score for the short term but you can easily rebuild your score by making payments on time, utilizing less than 30% of your credit limit, etc. So, it will be better for you to be prepared for a small drop in your credit score. However, if your card issuer offers you a credit card upgrade on their own, there will be no impact on your credit score.
Upgrading a credit card is a good thing and can be beneficial for you in many ways, especially in lowering your credit utilization ratio. But, you should first think about whether you really need a credit card upgrade or not? If you feel like your current card is not good enough for you, you should definitely go for it, but if you feel like your current card suits you better than a premium card that is being offered to you, you can avoid it. Keep all the above factors in mind before updating your credit card and then make a decision wisely. If you have any further doubts regarding the topic, you can freely ask in the comment section below!