A new silver-rare earth oxide contact material, Ag/SnO2-La2O3-Bi2O3, has been produced using powder metallurgy method. The microstructure of Ag/SnO2-La2O3-Bi2O3 was analyzed using SEM and EDS. The new contact material was tested through temperature rise, make-break capacity testing and arc erosion. The new contact material passes the make-break capacity testing, its temperature rise is similar to that of Ag/CdO and the average arc erosion of make contact is only 2/3 that of Ag/CdO. At last, the cost of Ag/SnO2-La2O3-Bi2O3 and Ag/CdO is analyzed. From the testing results and the cost analysis, the new material has preferable physics, mechanism and electric behavior and lower cost. The new innocuity contact material may be substituted for Ag/CdO because of its preferable application foreground and economy benefit.