When to upgrade your starter credit card
Quick insights
- There are some signs that can indicate you’re ready to move on from your starter card such as establishing a pattern of making on-time payments, improving your credit score or experiencing lifestyle changes.
- When deciding which credit card to upgrade to, consider your financial goals and spending habits. You can research different cards tailored to your spending such as travel credit cards, rewards credit cards and cash back credit cards.
- It may be beneficial to consider sign-on bonuses and align your spending with categories where you typically spend more money to maximize rewards.
Upgrading your credit card can be a strategic financial move, offering benefits for your financial health and stability. By carefully considering various factors such as your financial situation and credit score, you can confidently move on from your starter card. If you choose to upgrade from a starter credit card, you could potentially enjoy benefits like enhanced rewards, lower interest rates and an increased credit limit.
Signs that you may be ready to upgrade your credit card
There are several signs that can suggest you’re ready to upgrade your credit card. For example, making payments on time and keeping your credit utilization low can be indicators of your readiness.
Your credit score has improved
If you have been consistently working on improving your credit score and it has increased since obtaining your current credit card, you may qualify for cards with better rewards, APRs and perks. A stable credit history can signal to a credit card issuer that you are ready for an upgrade. A higher credit score typically demonstrates creditworthiness. Credit card companies often reward loyal cardholders with access to credit cards with better features and added perks.
Financial stability and lifestyle changes
If your salary or income has grown, you might be eligible for cards with higher credit limits and more favorable terms. This also applies to changes in your spending habits such as an increase in travel or dining expenses. Upgrading to a credit card that aligns with your current spending patterns can maximize the value you receive from rewards and benefits.
Paying off debt each month
Consistently paying off debt each month can demonstrate financial responsibility to lenders. Paying off debt on time and in full can help you avoid interest charges, improve your credit utilization ratio and help showcase your ability to manage credit.
Making payments on time
Making timely payments on your credit cards, loans and other debts can be an indicator to creditors that you are reliable and able to handle your financial obligations. A solid history of timely payments can play a crucial role in determining your credit score and make you eligible for upgraded cards with favorable terms.
Deciding which credit card to upgrade to
When deciding which credit card to upgrade to, consider your financial goals, spending patterns and lifestyle preferences. It can be beneficial to think about the value proposition of low annual fee credit cards versus cards with an annual fee, including the rewards structure, added perks and introductory offers.
Travel credit card
Consider your travel frequency and habits. Ask yourself the following questions to determine if this option aligns with your travel preferences:
- How often do you travel?
- Do you prefer specific airlines and hotel chains?
Look at different travel credit cards that offer rewards and benefits that align with your travel needs such as hotel points, airline miles and travel protection. It may be a good idea to evaluate sign-up bonuses and competitive rewards rates on travel-related purchases. Sign-up bonuses typically come with eligibility requirements, such as spending a certain amount within a specified timeframe. It can be important for individuals to fully understand these requirements and evaluate whether they align with their spending and repayment habits before applying for an upgraded credit card solely for the sign-up bonus.
Rewards credit card
It might be important for you to assess your spending patterns and prioritize rewards categories that align with your daily expenses like at grocery stores, gas stations or on entertainment.
- Redemption options: Consider the flexibility and variety of redemption options offered by each card. You might want to look at rewards credit cards that offer numerous reward redemption options like statement credits, travel bookings or gift cards.
Cash back credit card
If you prefer to earn cash back on purchases, you may want to review the cash back structure of different credit cards including flat-rate cash back, rotating bonus categories and tiered cash back. For instance, the Chase Freedom Rise℠ Credit Card gives cardholders 1.5% cash back on all purchases.
Selecting a cash back credit card that offers the highest cash back rates in categories where you frequently spend money can accelerate your points and rewards earnings.
- Redemption flexibility: Cash back credit cards typically offer a variety of reward options such as statement credits, direct deposit and checks. You may want to look for credit cards that do not impose minimum redemption thresholds or expiration dates on cash back rewards.
Bottom line
As you think about moving on from your starter credit card, consider different factors and compare features of travel, rewards and cash back credit cards. Additionally, achieving financial stability to comfortably manage higher fees or varying rewards structures can indicate your preparedness for an upgrade. Taking the time to consider these factors alongside your financial goals can help provide guidance as you transition to a credit card that reflects your evolving financial needs.
