Upgrading credit card – The Hindu

As your income, spending habits and lifestyle change, the existing credit card may not suit current needs and requirements. In such situations, a credit card upgrade could be helpful.

Upgrading means switching to another credit card, usually a higher variant, from existing card provider. This would earn higher rewards and better benefits and sometimes even higher credit limits, which would help maximise savings while maintaining current lifestyle. You can consider an upgrade in the following situations:

Eligible for better cards

While an entry-level card can be a good option for beginners, it comes with a low reward rate and usually lacks additional perks like lounge access, milestone benefits, movie benefits, etc. Hence, it is important to review spending patterns every few months and check for upgrade offers from the bank. If you have a strong credit history and excellent repayment record, your card issuer may extend a card upgrade, often with lifetime-free or first year free offers, additional joining bonus, or welcome vouchers, which can help you maximise savings. In such cases, upgrading would be a smarter choice. However, ensure the benefits of the existing card align with your current lifestyle.

Higher value-back on spends

If your card spending has increased and the existing card only comes with a basic reward rate, you may not be able to maximise savings. Upgrading to a card with a better reward rate, especially in your preferred spending categories, could enhance savings.

For instance, you have an SBI Simply Click Credit Card with accelerated rewards on select online brands, but with time, your income and expenses have increased, and you find yourself spending a considerable amount online, with a majority of it being beyond the select few brands. Here, upgrading to the Cashback SBI Card could help you get much higher savings on all online spends, as there are no merchant restrictions.

Category-focused benefits

Spending habits change with time as you grow financially. If monthly expenses have grown, especially in a particular category like travel, shopping or dining, upgrading to a card with more category-focused benefits could help you save more.

For example, someone using an entry-level card like Axis My Zone can consider upgrading to Axis Horizon or Axis Atlas for travel-centric benefits. These give stronger value-back on travel spends with the option to transfer accumulated points to popular airlines and hotels. Enhanced perks around lounge access, milestone benefits, forex markup fee, etc. can also be a good add-on for travellers.

Higher credit limit

As income grows over time, you need a higher credit limit to manage increasing expenses. If you continue with your existing credit limit and max out your credit card frequently, it can affect your credit score. Moreover, a consistently high credit utilisation ratio shows you are overly dependent on credit, which could make lenders apprehensive of extending more credit to you. Upgrading to a credit card that aligns better with your current needs and offers a higher credit limit can offer you a well-rounded solution. However, note that a card upgrade does not guarantee a limit increase, so it is essential to confirm this with the card provider before opting.

Cash flow management

At the time of upgrading, you can also change the credit card billing cycle. This will help manage cash flow easily by aligning the billing cycle with monthly expenses. For instance, if you are a salaried person and your existing card’s due date falls at the end of the month, you can change the cycle so that the bill is due at the beginning of the month, which would make it easier to manage monthly cash flow.

Before an upgrade, review overall card benefits, fees, charges and other terms and conditions to ensure it matches current lifestyle and helps maximise savings. The right upgrade at the right time can help save significantly without affecting financial goals.

(The writer is chief business officer, credit cards, Paisabazaar)