Credit card companies have devised a way to confuse consumers: by offering rewards and enticements to get them to move from an existing card to a new one. This can come in the form of lower interest rates, points, rebates, a lower annual fee or some combination of all of them. There's nothing wrong with switching cards, but before you do, you must get to the bottom-line cost the change will have for you. (The average American household has four cards, but does that mean more is better? Find out in How Credit Cards Affect Your Credit Rating.)
Interest Rate
If you own two cards, and the interest rates are 8.5% and 16% respectively, on $1,000 constant balance you will be paying about $83 or $172 respectively. If you don't have or never will have a balance on your card, the lower interest rate isn't valuable to you, and you should look for other perks.

When trying to compare and find the best card for you, it's crucial to decide what type of borrower you are. Are you going to just roll the balance on to this card for a short time, and then try to move it again? While this isn't a suggested strategy, it has been used by many people to avoid higher interest rate charges. In that case, while there is risk you won't be able to roll it into another card, the introductory rate may be the key for you.

If you have good credit and are a perfectionist when it comes to paying bills on time, the average rate may be the key for you. But the occasional late payment may cause you to find yourself facing the maximum annual percentage rate (APR). (It needs to be noted that, if this is the case, you should be focused on paying off the debt.)

Valuing Points
Instead of lowering fees, some cards provide points that can be used for purchases or airline miles. Airline miles earned are based on the amount of money you spend using the card. Naturally, the more you spend, the more miles you earn. But beware of the "free gift" theory, which states that the "gift" is worth much less than the principal you'd be paying in order to earn it - therefore, placing you in unnecessary debt. However, big spenders, especially those with corporate accounts that can keep the miles, may find the points to be irresistible. (Be sure to take advantage of whatever your card has to offer, in Credit Card Perks You Never Knew You Had.)

If a card offers you rebates, the amount of spending you do is going to be a significant factor in the value of the card. So look at past spending and determine your most likely spending habits going forward. If you run $5,000 through your card per year, and the card offers a 1% rebate, you save $50 using that card. The more you run through, the bigger the rebate. But if you aren't adding new charges, then this isn't the way to go. Typically, rebates are only offered on new purchases, so just paying off a balance won't help here.

Annual Fee
If the only difference between cards is the annual fee, the decision would be easy. But it's usually not that simple. For example, if a flight rewards card gives a certain amount of points per dollar spent, but has a higher annual fee and a higher interest rate, you need to calculate how much needs to be spent and how soon the balance needs to be paid off in order to make it worthwhile. (Avoid these pitfalls to keep your credit score healthy and your debt under control; 6 Major Credit Card Mistakes.)

In Combination
Doing the math for each potential card, based on your projected use of the card, is the only way to decide which method is best for you. If you can get to the bottom line, you can find the break-even point at which you will begin to see a return on changing from your existing card. In some cases, this may never come - and in others, it may be instant. To determine where a different card would pay off for you, it's crucial to understand your personal spending pattern and decide accordingly.

Related Articles
  1. Credit & Loans

    Walmart MoneyCard Vs. Walmart Credit Card

    Discover how the Walmart MoneyCard and the Walmart credit card have different benefits that may influence your decision on which one to choose.
  2. Savings

    These 10 Habits Will Help You Reach Financial Freedom

    Learn 10 key habits for achieving financial freedom, including smart budgeting, staying abreast of new tax deductions and the importance of proper maintenance.
  3. Credit & Loans

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
  4. Credit & Loans

    How To Minimize Holiday Debt Before It Happens

    Holiday expenses can drown you in debt. Find out how to avoid this festive spending hangover.
  5. Credit & Loans

    These Are The Best Credit Cards For Making Balance Transfers

    Handled correctly – and very carefully – a promotional credit card balance transfer offer can save you money. Here are some of the best deals around now.
  6. Investing

    How to Raise Your Credit Score Quickly

    Here are the best tips for raising your credit score quickly.
  7. Credit & Loans

    Getting Your Name Off A Cosigned Loan

    If you want to remove your name from someone else’s loan, there are four key ways to do it.
  8. Credit & Loans

    How Credit Card Delinquency Works

    When you pay less than the minimum monthly payment on your credit cards, you become delinquent.
  9. Credit & Loans

    5 Bad Moves That Will Torpedo Your Credit Score

    Your credit score can change if you aren't careful. From missing payments to carrying high balances, there are many ways to torpedo your credit score.
  10. Credit & Loans

    5 Common Misconceptions About Your Credit Report

    Your credit report is one of the most important factors in determining your ability to get loans and new credit and has a major influence on your rates.
  1. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reducing the number of times shoppers and buyers have to pay for ... Read Full Answer >>
  2. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  3. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
  4. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  5. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
  6. Can the Best Buy credit card be used anywhere?

    The Best Buy credit card can only be used in Best Buy stores and when making purchases online through the Best Buy website. ... Read Full Answer >>

You May Also Like

Trading Center