Most of us start our credit journey with entry-level credit cards, as they usually come with relaxed eligibility criteria. However, such cards offer basic features and benefits. As you grow financially, your spending habits and preferences also change. In such cases, you may want to switch to a better credit card that suits your existing needs and requirements. Hence, applying for a credit card upgrade is a good option to get a new credit card with enhanced benefits without raising any hard inquiries or affecting your credit score. Here are a few things you should keep in mind before opting for a credit card upgrade:
Assess your spending behaviour
Each credit card offers a different set of benefits targeted towards a specific audience. As your financial situation improves over time, your spending habits evolve accordingly. How you spend money right now will be very different from how you spend it ten years later. For instance, if you started your journey with Axis ACE Credit Card and, over time, realized that you travel frequently and wanted to save on your travel expenses, switching to Axis Atlas would be a wise decision. Hence, it is important to first analyze your spending pattern to find the best credit card as per your lifestyle.
Analyze credit card benefits
Before opting for a credit card upgrade, it is important to analyze all the features and benefits of the card and compare them with other options available in the market. Besides rewards or cashback, look for additional benefits such as complimentary lounge access, free memberships, complimentary vouchers, and more. These additional benefits can significantly enhance the overall value of the card. Additionally, comparing multiple cards will help you decide whether to upgrade to a card from the same issuer or apply for a new one from a different issuer. Choose a credit card upgrade if it offers better benefits that align with your lifestyle.
Consider fees and charges
A credit card upgrade allows you to avail better benefits but usually comes with higher fees and charges. For instance, you currently have HDFC Millennia that charges an annual fee of Rs. 1,000 and you have the option to upgrade to HDFC Diners Club Black, which charges Rs. 10,000. While both cards come with annual fee waiver condition, HDFC Diners Club Black requires a higher annual spend threshold of Rs. 5 Lakh compared to HDFC Millennia, which has a spend threshold of Rs. 1 Lakh annually. Therefore, it’s important to conduct a cost-benefit analysis to decide if this card upgrade will be favorable for you. Thus, consider a credit card upgrade only when the monetary value of the card’s benefits justifies the annual fee charged.
Opt for a higher credit limit
The credit limit is the maximum amount you can spend with your credit card. As your expenses increase, you may need to raise your existing credit limit. Additionally, a credit card upgrade with better rewards but a lower credit limit can affect your Credit Utilization Ratio (CUR), which may negatively impact your credit score. Keeping your CUR as low as possible for a healthy credit score is important. Therefore, to avoid such negative consequences, it would be better if your credit card upgrade also comes with a higher credit limit.
Though you can request a limit increase on your existing credit card, entry-level cards might have a maximum limit condition on them, beyond which the limit cannot be increased. Similarly, secured cards offer credit limit as per the fixed deposit amount. In both these cases, a card upgrade that offers a higher credit limit would be helpful.
Related Read: What determines your credit card limit in India? Here are 6 key factors
Review reward points & other benefits
Before opting for a credit card upgrade, it is important to check your reward points balance. Ask your issuer if the accumulated reward points will transfer to the upgraded card. If not, redeem your accumulated reward points first, and then consider upgrading to maximize your savings. Additionally, if your existing credit card offers milestone benefits and you are close to achieving them, it would be better to wait until you reach the spending milestone before upgrading to another card.
These are some of the things you should keep in mind before upgrading your credit card. When opting for a credit card upgrade, it is important to evaluate whether this upgrade will be valuable for you by assessing your spending behaviour and the card’s features. Not every credit card upgrade comes with benefits, so make sure the upgraded card’s features align with your lifestyle.
