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When credit cards change, what does it mean for you?

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When credit cards change, what does it mean for you?

As a credit card user, at one time or another, you may receive notice that your account is going to change, and a new card is on its way to you. The letter or email will assure you that even though your Visa may turn into a MasterCard, or the name of the bank is changing, the only thing you'll need to do is replace your old card with the new one.

The truth is, however, that there's a little more to it than that. Other than welcoming a new, shiny card into your wallet, here is what else you need to know about when a credit card account evolves.

It's not about you (or your credit)

The agreement that the lender has with its payment processor (such as Visa or MasterCard) really has nothing to do with the information that is compiled by the credit reporting bureaus, says Rod Griffin, director of public education for Experian, one of the Big 3 credit agencies (along with Equifax and TransUnion).

"When a lender may choose for business reasons to change their service provider, that should be a seamless activity from a credit reporting standpoint," Griffin says. "The consumer would be issued new cards, but the account itself would be updated automatically."

Why does it happen?

Sometimes credit card issuers will sell portions of their card portfolios to other credit card issuers, or they will change card brands, like going from a MasterCard to a Visa for example, says John Ulzheimer, credit expert at CreditSesame.com.

"In either scenario, you're going to get a new card because the old card was issued with the old bank's or network's branding," he says.

What to watch for

Along with your new card, you'll get a new account number, and the website in which you complete your payments and view your account online may change. Most credit issuers try to make such transitions as seamless as possible, but it will be up to you to remember to change your account number if you are using the credit card to make automatic or reoccurring payments with certain vendors, says Griffin. For example, your fitness club may have the old credit card on file, or you might have a Netflix account billed to your former card number.

There is also the possibility that the new creditor will eventually change the terms of your account, which could mean a higher interest rate or a lower credit limit, says Ulzheimer. But not to worry -- such changes won't happen overnight.

"You'll get a notice informing you of any adverse change to the terms of your account," he says, and then you can make a phone call to inquire more.

Another thing to be mindful of is potentially missing a payment because you didn't receive your new credit statement in a timely manner (or maybe you didn't recognize it and you tossed it aside), or you had trouble with the new online billing system.

"If that happens, contact the new lender right away and explain the circumstances," says Griffin. "Work with the lender and resolve the issue before any late payment information is reported to the credit reporting company."

It's worth noting that you have to miss a full billing cycle of 30 days before a creditor will notify the credit reporting companies, so you do have a little wiggle room before your credit score is dinged.

Tie up loose ends

Once you do receive your new card and begin using it, Griffin recommends shredding the old cards. Just tossing it into the trash whole could open you up for identity theft, so take a moment to destroy it.

Although an evolving credit card account should have no negative effect on your credit report, mistakes can happen. Credit scoring systems take into consideration the average age of your accounts and adding a new account to the mix will lead to a younger average and possibly a lower credit score, says Ulzheimer.

As long as all the account information remains the same, as in the case of an account change, however, then there's no impact on your credit score, says Jeff Richardson, spokesperson for Vantage Score.

"If for some reason, the new bank opens a new account and the consumer loses the age of the account, then naturally the score would be impacted," he says.

That's why it's always good practice to check your free credit report at least once a year, says Griffin.

"It's free, and the most certain way to ensure that all of your credit information is correct," he says.

Overall, changes to credit card accounts are usually fairly straightforward and stress-free. By taking a moment to ensure that the card change is reflected accurately on your credit report, updating your payment information where necessary, and destroying your old cards, you'll ensure a smooth, easy transition.