Factors to Consider before Opting for a Credit Card Upgrade

A credit card upgrade is a convenient way to get access to higher rewards, better benefits, and an increased credit limit. Thus, existing credit card users often opt for a credit card upgrade to match up to the evolved spending patterns and preferences. Sometimes, card issuers also offer an upgrade to their existing users as a reward for maintaining a good credit record over years. However, similar to many other lucrative offers and promotions, even while an upgrade offer might seem profitable, it must be accepted considering a few important factors.

Check Available Credit Card Upgrade Offers


When presented with an upgrade offer, you must check if you are eligible for one or more credit cards with the issuer. When you have multiple offers, you must shortlist and compare the best credit cards based on their features and benefits, analyze your spending patterns to understand the overall benefit that you can possibly derive out of the card.

For instance, let us assume you own an HDFC MoneyBack Credit Card, and are offered an upgrade offer for multiple cards, like HDFC Millennia and HDFC Regalia Gold. Now you must access which card can serve you better. If you would like to get cashback benefits on your major online spends, Millennia could be the better option. Whereas, if you want an all-rounder card for extensive reward and travel features along with benefits on lifestyle categories like shopping and dining, you should consider getting Regalia Gold.


Check Features and Rewards


As your income grows, your spending patterns, needs and habits also evolve over time. Clearly, the way you have been spending money until now will be very different from the way you spent five years down the line. Therefore, with a credit card upgrade, you must check if the offered features match with your current spending patterns.


Check if the card offers you any benefit in your major spending category, whether you will be able to meet the fee waiver criteria, or avail the milestone and joining bonuses. You must also consider the type of card you would like to get, whether a reward or a cashback card, or a card with focus on a specific category like fuel, travel, shopping or a lifestyle card offering all-rounder benefits. If you go for a rewards credit card, you must also be aware of the redemption options and values offered.


Know the Offered Credit Limit


A credit limit is the maximum amount that you can spend using your credit card. As your needs and expenses grow over time, you will require a higher limit. Thus, it is one of the most important considerations for a credit card upgrade. After shortlisting the card you wish to upgrade to, you must also ask the issuer whether you would be getting a limit increase as well.


Not only do you get a chance to make big-ticket purchases, but access to a higher credit limit also boosts your CIBIL score by positively affecting your credit utilization ratio (CUR). CUR is the ratio of the total outstanding balances on your credit cards to the total credit limit, thus indicative of the percentage of the credit limit used. Thus, with an increased credit limit, the CUR reduces, highlighting your reduced dependency on the available credit. Additionally, an increased limit also enhances your financial immunity, as you have more funds to access in case of emergencies. Besides, you are eligible for higher pre-approved loan amount offers that are issued against your credit limit. Thus, for a credit card upgrade, always look out for an increase in your credit limit as well.

Consider the Fees and Charges


Not all credit cards come with similar fees and charges. Thus, when upgrading to a different card, you must check the applicable annual and joining fees. If you switch from an entry-level card to a premium card, you will most likely be liable to pay a higher annual fee. Thus, you must note the one-time joining fee and yearly annual fee, along with the fee waiver criteria, welcome bonus and milestone benefits, to do a cost-benefit analysis. If you are promised a ‘free’ credit card, ask your issuer whether only the first year fee will be waived off or the card will be lifetime free. Also, ensure that there are no terms and conditions attached to the free credit card offer.


You must also be aware of the applicable interest rate, cash withdrawal charges and late payment charges that could be imposed when you carry forward your payments. Additionally, you must also note other charges like forex markup fee if you are a frequent international traveler or EMI interest rate if you frequently make big-ticket purchases on your card.


Understand that upgrading to a new credit card opens better credit avenues for you, but at the same time, it might come with a higher responsibility due to increased fees and charges. If the upgraded card comes with a higher credit limit, the additional purchasing power might also lead to impulsive buying. Hence, in order to avoid the possibility of reckless usage and unnecessary penalties, it is better that you opt for an upgrade only when you are confident of your repayment ability. You must ensure responsible and mindful usage to derive the maximum value.


Also Read: Credit cards: Keep tabs on your spending




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