Credit cards: upgrading your card? Follow these 4 tips


When you apply for your first credit card, you usually get an entry-level card with basic features. While these cards are good for starting your credit journey, they are not designed to offer lucrative perks such as accelerated rewards/cashbacks, travel perks, lounge access, and more. However, over time, as your income increases and your credit score improves, you can upgrade your card to a card that offers benefits more suited to your spending.

Here are some things you should know before updating your credit card.

Choose a card that matches your spending preferences

Most credit cards are designed to provide significant return value on one particular category while providing general benefits in other spending categories. For example, travel credit cards come with features that allow you to save on your travel expenses, such as additional rewards/discount offers on travel bookings, free airport lounge access or free plane tickets. Fuel credit cards, on the other hand, offer return value on fuel expenses. Understand the categories you spend the most in, then switch to a card that offers benefits in those categories.

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Know the details of the reward

Once you know the type of credit card you want and have selected a few cards, read the features offered by each card as well as the associated terms and conditions. For example, if you opt for a shopping credit card, you need to see how you will recoup the value, i.e. in the form of rewards, cashback or direct rebate.

“If the cards offer the best benefits only on certain brands or online shopping platforms, it is better to choose one whose advantages correspond to your interests. Some credit cards offer a good rate of gain but come with “a maximum cap on earnings. So if you’re a big spender, you should also check the upper limit for cashback or rewards,” says Sachin Vasudeva, Director and Head of Credit Cards, Paisabazaar.

Consider the annual fee on the upgraded card

A credit card with better features would generally incur higher annual fees than a basic credit card. It is very important to do the cost-benefit analysis to see if the annual fee charged by the bank is justified for all the benefits offered. Additionally, credit cards usually come with an annual fee waiver feature where you get the annual fee waived/waived if you go over a pre-set spend threshold. When you upgrade the card, you need to make sure the annual fee is justified, or you can easily reach the spending milestone so the fee is waived/waived.

Request a higher credit limit

When you upgrade your card, issuers usually increase your credit limit as well. “A higher credit limit will benefit you in many ways. You get more purchasing power and access a higher amount in times of financial emergency. A higher limit would also reduce your overall credit utilization ratio, which would improve your credit score. Note that increasing the limit depends on many factors such as the type of card offered, your current income, etc. “says Vasudeva.

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Also try to get more clarity on the status of your current card before moving on to a new card. You may have a rewards or cash back balance that has not yet been credited to your card account. When requesting an upgrade, ask the issuer if the reward balance will be added to the new card account or if you need to redeem it before the transition. Clearing them up will ensure you don’t lose reward points earned on your current credit card.

Maximize benefits

* If you opt for a shopping credit card, check if you will get the value in the form of rewards, cashback or direct rebate

* Do the cost-benefit analysis to see if the annual fee charged by the bank is justified for the package of benefits offered

* When you upgrade your card, issuers usually increase your credit limit. A higher limit will lower your overall credit utilization rate

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