Upgrading your credit card: Keep these things in mind

The usage of credit cards is rising. Many people keep multiple credit cards as these often offer lots of benefits like multiple reward points, cash back and others apart from extending help when one needs emergency funds. Banks generally ask to upgrade existing credit cards once in a year or two. But before upgrading a credit card one should keep these important things in mind.

Assess spending habit

It is important to assess your spending pattern before opting for an upgrade. Upgrade your credit card only if it gives you more benefits on specific transactions that you often go for. So, before upgradation please understand your usage pattern and then proceed.

Cost benefit analysis

A credit card upgrade may come with higher joining and annual/ renewal fees as well. Opt for a credit card upgrade only if the reward points and other benefits exceed joining or renewal fees of the upgraded card. Do a cost-benefit analysis before upgradation.

Reward points and others

A credit card upgrade allows you to avail of special offers and higher rewards on future transactions. Some cards also provide access to several lifestyle benefits, such as free access to airport lounges, dining discounts, free golf course membership, etc. Before upgradation check all offers.

Higher credit limit

Upgradation of credit card means higher credit limit. So before opting for the new one, check how much your credit limit would increase from the current one.

Loan amount

Credit cards always offer an instant loan. Always check that loan amount before upgradation of the existing credit card as this loan might turn into savior in emergency time.

Other benefits

Almost all credit cards offer big discounts on spending. Some offer heavy discount on fuel purchase, some offer discount on restaurant spending while some offer cash back and discount on online spending. So, you should check what extra the new one is offering.

Bottom line

Injudicious use of credit cards can land one in a debt trap.

“It is not always advisable to upgrade the credit card. Before upgradation one should always check what benefits is the new one offering and also the cost of the card. Go with the new one if everything is fine,” said Nilotpal Banerjee, a personal finance expert.