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How to Switch Your Main Credit Card

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Axe AttackI had a reader Jackson email me the other day asking about switching credit cards. It turns out that his current main credit card is being phased out and replaced with one whose rewards structure is less rewarding for him. The one thing holding him back is the thought that switching credit cards would hurt his credit score. As we traded emails, I learned that he recently bought a house, had a great credit score, and was generally very fiscally responsible. The only reason why he was concerned was because the whole credit scoring system was a black box.

When you apply for a new credit card, you add a hard inquiry to your report which will lower your credit score. The impact of that score is pretty small, unless it takes a good credit score and knocks it down into a lower tier. That drop, of course, only matters if you plan on getting a new loan, which Jackson isn’t doing. He bought a house a year ago and doesn’t plan on getting any more loans.

The one thing he can do to minimize the impact of the change is to keep the old credit card around instead of canceling. This will lower his credit utilization by increasing his total credit limit. That will matter less than the inquiry but every little bit counts.

You’ll note that throughout this entire explanation, I wasn’t able to use any real numbers. No one can say for sure how many points you lose for a hard inquiry, or what percentage utilization you need to be “good,” that’s all be design. I think an ideal world would have us all understanding how the credit score is calculated, but you can bet the money in your wallet there are lobbyists fighting against that.

(Photo: danesparza)

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10 Responses to “How to Switch Your Main Credit Card”

  1. cubiclegeoff says:

    Of course you generally have to remember to use that old credit card occasionally since many companies now have a fee if the card isn’t being used.

  2. billsnider says:

    If the person has good credit, no past dues, is paying his bills, etc., why would you worry about the impact of your credit score? I think this is a situation where one can over engineer something.

    Just go about your life and don’t get this hung up. If you don’t use and want a credit card, get rid of it.

    Bill snider

  3. FlyFisher says:

    Good advice Bill, nothing to worry about too much unless it is a problem because your score is already low. I do think there needs to be a more clear cut system in place as to what makes up the parts of your score. It would be nice to know and it would help people be more credit responsible.

    • billsnider says:

      indirectly, you agree with me. Go about your life, pay your bills on time, don’t get over your head buying stuff you can’t avoid, and life will work out. If you do this i say screw the score. it becomes meaningless.

      Bill snider

  4. zapeta says:

    I switched my main credit card a few months ago and it was easy. I just got the new card and forgot about the old one. I’ve kept the old one open but I haven’t used it. I’m hoping they don’t cancel it to keep my utilization low but if they do, no big deal.

  5. lmg says:

    If you pay off the cedit transfer with in the limited time offer how does that affect your credit score?

  6. MikeB says:

    The only things that are going to affect your credit score in this situation is the new inquiry, closing out an old acct (lowering the average length of your credit history for revolving accts). And the available credit vs. used credit on your total among all revolving accts. But if your credit is excellent, these types of changes will have a minimal impact on moving you into a different risk category.


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