Switching credit cards is a strategic move that requires careful consideration and timing, especially for those looking to maximize their airline miles.
Unlike choosing where to dine, switching credit cards isn't a frequent activity and demands a well-thought-out strategy that aligns with your spending habits and financial goals.
Here’s a guide to help you determine the best time to switch credit cards to earn the most airline miles.
Evaluate Your Credit Score
Before making any decisions, it’s crucial to understand your credit score. A strong credit score improves your chances of being approved for a new card with better rewards.
Here are a few steps to ensure your creditworthiness:
Payment History: Ensure that you have been paying your existing credit card bills on time. Late payments can significantly impact your credit score.
Debt-to-Income Ratio: Keep your debt levels low relative to your income. A high debt-service ratio can be a red flag to banks.
Credit Utilization: Aim to use less than 30% of your available credit limit. High credit utilization can negatively affect your score.
Plan Ahead for Future Travel
If you anticipate traveling overseas in the near future, it’s wise to obtain a credit card that offers high rewards on international spending well before your trip. Here’s why:
Higher Accrual Rates: Many credit cards offer higher miles accrual rates for overseas spending compared to local spending. This means you can accumulate more miles faster when you use your card abroad.
Bonus Points: Some credit cards provide sign-up bonuses if you spend a certain amount within the first few months. Planning ahead allows you to meet these thresholds with your travel expenses.
In my case, I usually have a long holiday in December, so I would start to see if my current credit card strategy is viable for the upcoming year in October. This gives me roughly two months to do research and apply for a new credit card if I am switching cards.
Understand the Importance of CASA Balances and Salary Crediting
Banks often reward existing customers who maintain healthy Current Account and Savings Account (CASA) balances and credit their salary into the bank’s account. This can make it easier to obtain a credit card with better benefits.
Consider these points:
Maintain a Healthy Balance: Ensure that you have a good amount of money in your savings or current accounts with the bank you plan to get the credit card from.
Salary Crediting: If you are considering switching to a new bank for a better credit card, ensure you have a strategy to start crediting your salary into the new account. This often smooths the process of getting approved for the new card.
Be Prepared for Potential Rejection
Applying for a new credit card can sometimes lead to rejection, which can impact your credit score if you apply for multiple cards in a short period. Here’s how to mitigate this risk:
Wait Between Applications: If your application is rejected, wait at least six months before applying for another card. This waiting period helps improve your credit score and increases the likelihood of approval.
Review Rejection Reasons: Understand why your application was rejected and address those issues before reapplying.
Monitor Your Spending Patterns
Choosing the right credit card also depends on your spending patterns. Different cards offer varying rewards for different types of spending such as dining, groceries, travel, and online shopping.
Identify where you spend the most and choose a card that offers the best rewards in those categories.
My Ultimate Guide by Spending Categories is helpful if you'd like to compare which credit cards offer the best airline miles accrual rates in each spending category, such as dining or groceries.
Keep Up-to-Date on Various Banks’ Airline Miles Strategies
Staying informed about the latest trends and changes in the credit card industry, particularly concerning airline miles, is crucial for making informed decisions.
In Malaysia, the top three banks for airline miles, based on cardholders, are Maybank, CIMB, and UOB. However, other smaller players like Alliance Bank are gaining traction due to their recent competitive airline miles accrual rates.
Here’s what you need to consider:
Monitor Trends: Banks often update their rewards programs, including airline miles accrual rates. Stay updated with these changes to maximize your benefits.
Watch for Devaluations: Be cautious of banks that frequently devalue their airline miles. For instance, Maybank has shown a trend of constant devaluations, which diminishes the value of your accumulated miles. It might be wise to avoid such banks for the time being.
Explore New Players: Smaller banks like Alliance Bank may offer competitive rates and benefits. Keep an eye on these rising players to take advantage of better accrual rates and bonuses.
Strategize Your Card Choices
Focus on one bank where possible to avoid ending up with stranded miles. It’s fine to have multiple credit cards from the same bank if the points pool together.
If you do opt for multiple cards from different banks, ensure they align with your conversion partners.
For example, using the Alliance Bank Visa Infinite and UOB PRVI Miles Elite for local and overseas spend respectively can be beneficial if you aim to earn Enrich miles.
However, if you are interested in other frequent flyer programs like Singapore Airlines KrisFlyer, remember that Alliance Bank Visa Infinite does not offer conversions to KrisFlyer.
Whether you're into Enrich Miles, KrisFlyer miles or Asia Miles, be sure to check out my Enrich Ultimate Guide, KrisFlyer Ultimate Guide and Asia Miles Ultimate Guide.
Likewise, if you're a fan of airport lounges, be sure to also check out my Ultimate Airport Lounge Guide and my Top 10 Best Credit Cards in Malaysia for Airport Lounge Access article to find the best credit card for airport lounge access that suits your needs.
Always Apply Directly with the Bank and Not a Third-Party
I'm sure many of you are aware of several third-party credit card blogs and comparison websites that offer seemingly attractive rewards and prizes for applying for a credit card.
Unfortunately, many people fail to read the fine print and end up wondering why they did not receive their promised rewards even after their credit card has been approved.
Here’s why you should be cautious:
Read the Fine Print: Many of these rewards are on a first-come, first-serve basis and include conditions that are not immediately apparent. Always ensure you understand the terms and conditions before applying.
Data Privacy: Be aware of the data you are sending to these third-party websites. Personal information may be shared or sold to other entities.
Direct Applications: Applying directly with the bank ensures that you are dealing with the institution itself, reducing the risk of miscommunication and ensuring that all terms and conditions are transparent.
Refined Points will never offer credit card application services like these third-party sites. Instead, we will always direct you to the bank’s official application site to ensure your safety and security.
Final Thoughts
Switching credit cards can be a powerful tool to enhance your airline miles strategy, but it requires careful planning and consideration.
Evaluate your credit score, plan for future travel, understand the benefits of maintaining good CASA balances, and be prepared for potential rejections. By aligning your card choice with your spending habits, you can maximize your rewards and make the most of your travel experiences.
If you need personalized advice on which credit card to choose based on your spending pattern and travel goals, feel free to reach out to me at kingsley@refinedpoints.com or visit our Consulting page for more information.
