Having a Baby in 2022? Here's Why It Could Pay to Switch Credit Cards – The Motley Fool

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Getting a new card could work to your advantage.

Key points

Having a baby can change your life — and your spending habits.It’s important to have credit cards that reward you generously for the purchases you make most often.

Before my husband and I had kids, we spent a fair amount of money on things like travel, restaurants, and entertainment. These days, we spend a decent chunk of money in those categories, too. But back when our kids were babies, our spending shifted considerably. Instead of paying for three-course dinners and spur-of-the-moment trips to Europe, we instead found our credit card statements largely consisted of diaper purchases, onesies, and pediatrician copays.

If you’re having a baby this year, you may need to make a host of lifestyle adjustments. But you may also want to apply for a new credit card (or two) to account for anticipated changes in your spending.

The importance of having the right credit cards

The upside of using credit cards is getting to rack up cash back and reward points for the purchases you make. But once you have a baby, you may start spending money in all new categories — and stop spending money in others. It’s important to make sure your credit card rewards programs align with your purchases.

Say you currently have a credit card that offers 3% cash back on restaurants. Well, once you have a baby, you may not end up dining out all that often. And so that credit card may not be of great value to you.

On the other hand, once you have a baby, you could end up spending a lot more money at supermarkets to load up on supplies and baby food. In that case, it could make sense to apply for a credit card that offers extra cash back on grocery store purchases if your current credit cards aren’t super generous in that category.

Also, keep in mind your general living costs might increase substantially once you have a baby, especially if you’ll need to start paying for childcare so you can continue to work. It pays to see if there are credit cards out there with better rewards programs than what you’re privy to now. Getting even an extra $40 or $50 in cash back during the year could go a long way at a time when you’re adjusting to a new set of expenses.

Finally, if you have any annual fee credit cards, make sure you think you’ll continue to use them once your baby arrives. And if not, cancel them. You may, for example, opt to get rid of a travel rewards card if it comes with a fee and you don’t expect to travel much the first year or so after having a baby.

Go in prepared

There are certain financial moves it pays to make before having a baby, like boosting your savings, reworking your budget, and if you don’t have it already, applying for life insurance. Similarly, it pays to assess your credit cards before your baby arrives and make sure their rewards programs will suit your new lifestyle. If not, you may want to apply for a new card or two before your baby makes its appearance.

Once you have a baby, your spending could change overnight. Having the right credit cards at your disposal could make it easier to adjust to all of that glorious upheaval.

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