Is your credit card no longer serving you? It may be time to switch.
What's in your wallet? A new survey finds that it may be a good time to take a close look at your credit cards. The pandemic has caused some changes and you may find your card no longer serves your best interests.
"I cancelled my American Express because it was really expensive to have," said one consumer CTV News talked to in downtown Vancouver.
That may be the case for many cardholders paying high fees. The rewards they offer may not be worth it anymore. Ratehub, a website that allows consumers to compare credit cards, says consumers are steering away from rewards cards.
"The fact is a lot of Canadians just don't want travel points if they are not going to use them any time soon and would rather have cold hard cash in their bank account or credit card," said Mikael Castaldo, general manager of everyday banking at Ratehub.ca.
A J.D. Power credit card customer satisfaction survey for 2021 found that 22 per cent of those surveyed had postponed reward redemption for more than a year and 22 per cent ditched cards with annual fees.
"There could be new products out there that you're not aware of or not familiar with that might fit you better," said John Cabell, director of banking and payments intelligence at J.D. Power.
The survey also found that customers are more satisfied with their primary credit card issuer than they were a year ago.
The card issuers that rate highest on the satisfaction survey for benefits, services and rewards are:
1. Tangerine Bank
2. Canadian Tire
3. PC Financial
4. American Express
6. RBC Royal Bank
7. Capital One
10. National Bank
11. BMO Bank of Montreal
13. TD Canada Trust
However, that does not mean you should cut and go. You have to consider what you are leaving on the table. How many rewards have you accumulated? If they are travel rewards, you may want to consider hanging on for a while longer until you can use them, unless the value is less than the upcoming annual fee.
Cancelling a credit card can also lower your credit score by increasing your credit utilization rate. That is the amount of credit available compared to your debt load. A lower credit score could mean higher interest rates on loans.
Rewards can still be enticing as long as you are not carrying a balance and paying interest or missing payments, which can quickly cancel out the rewards benefits.
In addition, beware of chasing rewards by transferring balances to get bonus points, etc. It's called card churning and it could damage your credit score.
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