Many Americans Never Change Credit Cards: Is This a Bad Thing?

lots of credit cards in a wallet

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Take a look in your wallet. Among the scant bills and movie ticket stubs are likely a few credit cards that you’ve had since you first started getting those card promotions in the mail. In fact, if you’re like most Americans you’ll have the same credit cards in your wallet for 10, 15, or even 20 years. And while loyalty is normally rewarded, in this case it doesn’t pay, says one credit card analyst. There’s never been a better time to pit credit card companies against each other to get the best rewards around, but that typically only happens if you’re willing to open a new card. Here’s why you might want to consider it.

First, if you’ve had the same credit card since you graduated from college and never bothered to change it, you’re not alone. A recent survey by CreditCards.com found that 25 million people have had the same primary credit card for 10 years. An additional 20 million people have never changed their go-to card. “Americans are really creatures of habit,” explained Matt Schulz, senior industry analyst for CreditCards.com. “The act of changing something as fundamental as your primary credit card is something that doesn’t happen easily.”

In an interview with The Cheat Sheet, Schulz attributed most of this trend to force of habit, not necessarily a desire to be one of the longest-standing account holders. “There’s probably as much inertia involved as there is loyalty, frankly,” he said. But whether it’s a force in motion staying in motion or a gold star for customer loyalty, the habit isn’t necessarily benefiting consumers.

Bonuses for everyone

One of the biggest reasons it doesn’t pay to stick with one primary credit card for a lifetime is because companies are offering the largest sign-up bonuses in the history of the industry, Schulz said. When you sign up for a new card, 50,000 bonus points and more than $100 in cash back bonuses are just a few of the offers out there at the moment. Even people with sub-par credit scores are eligible for some of these offers, Schulz said. “That’s further indicative of how competitive the credit card marketplace is and how intense the battle is to get new customers,” he explained. 

Credit companies are eager to sign up new customers because of the precarious balance between spending and large amounts of debt, Schulz said. “All the data shows that people are spending again on their credit cards. But we haven’t reached that tipping point yet where we see people getting into trouble,” he said. Delinquencies on credit card bills and bankruptcies are low, which makes banks and credit companies more eager to lend money to consumers. For now, the customer is king.

New card reluctance

man cutting a credit card with scissors

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However, convincing people to cut up their old plastic in favor of a new shiny card is easier said than done. Most companies are combatting the habit of people receiving a new offer in the mail, and shredding it before they even open up the envelope. To some, it’s the definition of junk mail.

In other cases, people worry that canceling their card of choice will cause their credit score to take a significant hit. About 44% of respondents cited this as a main reason they don’t cancel older cards in favor of new bonuses. Young adults (ages 18 to 29) were the most adamant about this concern: 57% said it was the reason they wouldn’t cancel an old card.

For the most part, Schulz said, this concern isn’t as big of a deal as people think it is. In most cases, applying for a new card only causes a slight ding on your credit report, which typically disappears rather quickly. That affect is nothing to worry about, Schulz said. A much larger factor for calculating a credit score is the utilization rate, which is the percentage of credit you use each month compared to your credit limit. (For example, if you have $3,000 worth of debt with a $10,000 credit limit, your utilization rate is 30%.) “That’s a very large factor in the credit scoring formula, but if you are cancelling an old card to get a new card with a similar credit limit or potentially bigger credit limit, that really ceases to be an issue,” he explained. 

One thing to keep in mind is that if you have fewer credit cards, cancelling one of them will have a larger impact on your score than if you’re cancelling just one of five or six cards. If you are concerned about how that will affect your score, Schulz suggests holding on to the old card without cancelling it. This is especially an option if the card in question doesn’t have an annual fee – you won’t have to pay anything extra, but if it’s a card with a positive history, that will stay on your credit report (and boost your score) for 10 years after you stop using it.

Additional tips

There’s two other things you should know about credit card bonuses and how to take advantage of them, without (literally) paying consequences. For one, keep in mind that if you’re planning to churn through these cards, you should wait to cancel them until 10-11 months after signing up – not right after collecting and using your bonus points. Otherwise, there might be some red flags on your report when you attempt to sign up for another new card in the future, Schulz said.

And finally, rewards cards with hefty sign-up bonuses aren’t for everyone. “Generally speaking, rewards are not for people who always carry a balance,” Schulz said. Rewards cards often have higher interest rates, meaning any rewards you collect will be overshadowed by the debt that’s snowballing on your account if you don’t pay off the card in full each month. “It doesn’t take much for the math to start working against you when you carry a balance,” Schulz added. 

Want to know more about how you can take advantage of credit card rewards? Check out our do’s and don’ts tutorial, and also explore some of the cards offering the best deals right now.

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