Knowing when to switch — and how to apply for a new credit card — starts with one idea: a card should match how a person spends. This guide covers comparing cards, applying, and closing an old one.
Should you switch credit cards
People often switch credit cards when a card stops matching how they spend or costs more than it returns. Three triggers explain many switches.
The earn rate no longer matches everyday spending.
An annual fee buys perks or benefits that go unused.
A balance is carried at an interest rate that could be lower.
Four signs you’re not getting the most out of your card
Several signs indicate a card may be costing more than it returns. Four common ones are:
Off-category rewards: the card earns a low rate on the categories where most spending happens.
Unused perks: an annual fee pays for benefits like lounge access or travel insurance that go unused.
Foreign transaction fees: some cards charge a fee of about 2.5% on purchases in another currency. It matters especially if you travel or shop internationally.
Carried balance: a balance carried at 20% or more in interest grows quickly and offsets rewards.
How to compare cards on four numbers
Four numbers describe most of a card's cost and value. Comparing them side by side shows whether a card fits a spending pattern. Category-specific round-ups, such as those on cash-back cards in Canada, compare earn rates in more detail.
Number | What it is | Why it matters |
|---|---|---|
| Annual fee | The flat yearly cost of holding the card. | It reduces net rewards and pays off only if benefits are used. |
| Earn rate | The percentage or points or cash back earned per dollar spent. | Higher rates in frequently used categories return more value. |
| Foreign transaction fee | A charge of about 2.5% on purchases in another currency. | It adds up for travel and international online shopping. |
| Purchase interest rate | The annual rate charged on carried balances. | A rate of 20% or more makes unpaid balances expensive. |
Those numbers tell you much of what you need to assess whether a card fits your spending.
A worked example
Consider spending $2,500 per month, or $30,000 annually.
A flat 2% rewards card returns about $600 in rewards annually. After a $120 annual fee, that nets about $480. The higher the fee, the more it could cut into your rewards.
A no-fee card earning 1% returns about $300 annually. In this case, the fee card leads by about $180.
A third case is worth adding: a card earning 2% with the annual fee waived. On the same $30,000, it returns the full $600, putting it about $120 ahead of the fee-paying card and about $300 ahead of the no-fee card earning 1%.
Does a new credit card application hurt your score
A new application usually lowers a credit score by a few points. That change comes from a single hard inquiry. A hard inquiry happens when a lender reviews credit for an application. A soft inquiry, such as a personal score check, does not affect the score. One hard inquiry stays on a report for about 2 to 3 years. Several applications in a short window matter more, because they can signal risk.
There's a wrinkle worth understanding. Canada has two main credit bureaus, Equifax and TransUnion, and lenders don't always report to both. The Financial Consumer Agency of Canada (FCAC) publishes guidance on credit reports and scores.
Closing an old card at the same time cuts total available credit and can impact your credit score. That can raise the utilization ratio, which can also affect your score.
How to apply for a new credit card in Canada
To apply for a new credit card in Canada, most applicants follow a short sequence of steps. First-time applicants can review the steps for a first credit card in Canada.
Checking your credit score first, which can indicate which cards an applicant may qualify for.
Confirming eligibility, including the age of majority in the province or territory, income, and Canadian residency.
Gathering personal details such as legal name, address, date of birth, and Social Insurance Number (SIN) if requested.
Gathering financial details such as employment status and annual income.
Submitting the application online, by phone, or in person.
Waiting for a decision — many decisions come back the same day or within a few business days.
If you’re declined,you can ask the lender for the reason and review their credit report.
Keep or close your old card
When people close an old card, they often complete a few steps first. Those steps help avoid missed payments and lost rewards.
Moving subscriptions and pre-authorized payments to another card first.
Spending or redeeming any remaining rewards before they are lost.
Clearing or transferring the outstanding balance.
Waiting for the final statement to settle at zero.
Getting written confirmation that the account is closed.
Some people keep an old no-fee card open when it is their oldest account. Credit history and available credit both affect scores.
When a balance transfer makes sense
If you're considering closing a card that no longer fits your spending pattern, you might want to consider looking for a new card that offers an incentive to transfer an existing balance if you have one.
Consider a $5,000 balance. A transfer fee of about 1% to 3% costs roughly $150. Carrying that balance over 12 months at about 20% could cost roughly $1,000 in interest.
At the end of the promotional period, the rate typically reverts to about 20% or more.
A transfer is often an effective fixed window to pay down debt aggressively, not a way to postpone it.
How long to wait between applications
A common rule of thumb is about six months between credit card applications. Spacing applications limits clustered hard inquiries. It also gives a score time to recover.
Several applications close together can weigh more heavily, because they may signal risk to lenders.