What to Consider When Switching to Greener Credit Cards: FAQs

As part of Third Act’s Banking on our Future Campaign, we are sharing information and educational resources about how you can align your money with your values and find better banks, credit unions, and credit cards.

Finding a new bank, credit union, and/or credit card is a very personal choice with many considerations about services that meet your specific needs. Check out our blog on “How to Switch to Better Banks & Credit Cards: FAQs” and watch the recording of the Responsible Finance Series Event #2: Better Banks & Credit Cards Webinar  to find search tools, step-by-step guides, and more resources. 

Q: When should I cut up my credit card to participate in Third Act’s Banking on Our Future Campaign?

A: Please don’t cancel your credit cards just yet. That’s because if you just quietly cut up your card on your own, the banks won’t take notice. We are encouraging you to first – take the pledge – and second open new, greener credit card accounts. We’ll be organizing a big national Day of Action in early Spring 2023 where we can all together cut up our cards and move our money with greater collective impact.  Please report-back to us on your progress and experiences opening new accounts.

Q: Will closing a credit card account affect my credit score?

A: Closing a credit card can lower your credit score, so it’s important to take precautions to lessen the impact. NerdWallet has several useful resources to guide you responsibly here and here. If you are considering a large new purchase that requires a loan and a credit check – like buying a home or a car – then do not close your old credit card before the purchase so the new loan approval won’t be affected. It’s also very important to start using your new credit card for a while before closing an old one. If you have had a credit card for many years, pay your bills on time, and have a good credit rating, then the credit history of this long-held card can stay in your credit report for up to 10 years.

Other considerations and tips include: do your own credit report check before making changes; choose a new credit card with the same credit level; reduce or payoff your credit card balance; and redeem any cash-back or other rewards before closing your existing account.

Lastly, we don’t want you to close your credit card account right away – we want to do this all together in Spring 2023 so we can have a bigger collective impact. You may consider keeping your existing accounts as secondary accounts – but using them much less often – that you may use in certain situations (like a credit card that may be better for international travel). Banks make 3-5% on each credit card transaction; so, reducing your purchases using the card from the big dirty bank will still have an impact.

Q: As a senior citizen, is it harder to get approved for a new credit card?

A: If you are older and are privileged to have already paid-off your home mortgage or car loan, then you may have a “thin” credit file that does not have a mix of types of credits (loans, credit cards). You may also have less income. So, getting approval on a new credit card could be harder. There are things you can do to improve your approval chances, including: 

• checking your own credit report first, 
• applying for and using new cards before you close any old ones, 
• making sure you list all types of your income, and 
• highlighting your long and positive credit history. 

You can build-up and enhance the credit mix in your credit rating in the near-term with a “secured credit card,” which requires an upfront deposit, and then transition to a traditional credit card later after your credit score has strengthened. 

NerdWallet has guidance for senior citizens applying for new credit cards. 

Q: What about my credit card rewards?

A: Many better credit cards from credit unions and other banks have perks, rewards, and features, as well, including cash-back. These kinds of perks and rewards are personal choices and values, based on how much and where you travel (domestic or international), how much you purchase, credit card fees, and other considerations. While perks and rewards have annual monetary value that you can estimate, and while switching may entail some tradeoffs, costs, or inconveniences, it’s important to weigh the benefits of perks against the serious costs and consequences of continuing with business-as-usual and the dirty banks that are financing costly and deadly climate destruction. For those who can economically afford to absorb some of the inconvenience or discomfort, this will reap climate benefits and help alleviate burdens experienced by climate-affected frontline communities. 

Regarding frequent flyer miles that you accrue via your credit card, those miles go directly into your airline’s frequent flyer account – they don’t reside with the credit card company. So, if you switch your credit card, you will not lose the frequent flyer miles already accrued to date, though you would stop accruing them after you switch or as you use this card less frequently. You should check with your credit card company and your frequent flyer program. We should also note that as a result of the pandemic and economic challenges faced by the airline industry, several airlines have been changing their frequent flyer rules and the number of miles required to redeem various trips. So, these perks may not be as valuable as they once were. Please check with your credit card and airline companies on the specifics.

For other points and rewards, you will want to use or apply them before you cancel the account.

Please note: Third Act is a non-profit educational, organizing, and advocacy organization. We are not investment advisors and are legally prohibited from providing investment or financial advice. The information Third Act provides is for educational purposes. Third Act does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. Financial choices are your personal decisions.