When you should consider downgrading or upgrading your credit card

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In a Nutshell

Are you in the market for a new credit card? Instead of applying for a new card, consider whether downgrading or upgrading your existing account would work for you.

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Did you know that closing your credit card account might actually hurt your credit?

You might think it’s the responsible thing to do, but what you may not realize is that when you close your card, both your credit utilization ratio and the average age of your accounts — two factors that impact your credit scores — could take a hit.

But that doesn’t necessarily mean you’re stuck with a bad credit card. If you’re thinking about closing your account — for example, maybe because you can’t afford its annual fee or you want to earn more rewards — a better option might be a credit card downgrade or upgrade.

Let me share a personal story with you about why I downgraded my credit card.


Why I downgraded my credit card

When the Chase Sapphire Reserve® came out in 2016, I couldn’t resist jumping on the bandwagon.

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Chase Sapphire Reserve®

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What’s not to love? The Chase Sapphire Reserve® offers a sign-up bonus of 50,000 points after you spend $4,000 on purchases in the first 3 months from account opening. Benefits include a yearly $300 travel credit as reimbursement for travel purchases charged to your card each account anniversary year and complimentary access to more than 1,000 airport lounges around the world with one-time enrollment in Priority Pass™ Select. In my opinion, if you’re using these rewards, this more than makes up for the hefty $450 annual fee.

The problem was, I had already opened the older generation of the same card about a year earlier, the Chase Sapphire Preferred® Card, which charges an annual fee of $95.

I found the two cards were similar enough that I couldn’t justify paying both annual fees. But I was hesitant to close my older Chase Sapphire Preferred® Card account because I knew it might hurt my credit utilization ratio and length of credit history, both of which have the potential to affect my credit scores.

So I opened the Chase Sapphire Reserve®. Then, instead of closing the Chase Sapphire Preferred® Card, I downgraded to the Chase Freedom Unlimited®, which charges a $0 annual fee, allowing me to keep the original account open so I could continue lengthening my credit history, positively impacting my credit health.

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The cherry on top was that Chase allowed me to transfer all the points I earned through my Chase Sapphire Preferred® Card to my new account.

If you find yourself in a similar situation and are wondering whether you should upgrade or downgrade your credit card, keep reading. We’ll help walk you through the process so that you can better anticipate what to expect.

What’s the difference between a credit card downgrade and upgrade?

There are a couple of specific situations in which a downgrade or upgrade may get you the card you want without having to apply for a new one.

  • You may want to downgrade your rewards card if you’re looking for a lower annual fee or interest rate.
  • On the other hand, if you’re looking to earn rewards for everyday spending or travel, you may want to upgrade your no-frills card to a rewards card offered by your card issuer.

In both situations, you may be allowed to keep your original account open so that you can continue to build credit from that account while, in many cases, avoiding the hard inquiry that typically comes with filing a new credit card application.

What is a credit card downgrade?

A credit card downgrade could help you switch to a more affordable card without closing your account and opening a new card.

Many rewards cards come with higher annual fees, which might be waived the first year but typically are charged after 12 months of holding the card. If you need to switch to a credit card with a lower annual fee at some point, you can request a credit card downgrade.

Although your account remains the same, you’ll get a new credit card, and maybe a new card number, when you downgrade.

What is a credit card upgrade?

If you’re still using a starter credit card but spend more money now than you used to, you might benefit by upgrading to a rewards card. A credit card upgrade could allow you to get a new card, possibly with better benefits and rewards, without requiring you to apply for a new line of credit.

When you upgrade, you may be able to keep the same credit account, but you’ll receive a new card in the mail.

If you applied for your first credit card and had no credit history (or poor credit), your card options may have been limited. You might not have qualified for top rewards cards with big sign-up bonuses and fancy benefits.

Once you have some positive credit experience under your belt, you might qualify for better cards. But you may still want to keep your first credit card to retain your length of credit history on your credit reports. That’s where a credit card upgrade comes in.

“A credit card upgrade is typically when you advance from having a starter card with little to no benefits or perks, to a new card with better perks and a [higher credit] limit,” says Srii Srinivasan, CEO of Chargeback Gurus.

How do I know if I’m eligible to upgrade or downgrade my credit card?

There is no hard-and-fast rule. I’d had the Chase Sapphire Preferred® Card for about a year before downgrading, but each credit card issuer has its own policy for determining whether you qualify for an upgrade or downgrade.

The best way to find out if you’re eligible is to call the number on the back of your card and ask.

Generally speaking, credit card issuers may be more willing to accommodate customers whose accounts are in good standing. An issuer may look at factors such as your credit reports and scores, payment history, spending habits, debt, income, employment and overall banking relationship.

What should I watch out for before switching cards?

Although upgrading or downgrading your credit card can be a handy way to switch cards without the potential of hurting your credit, there may be drawbacks.

No sign-up bonus

You’ll probably miss out on any sign-up bonus the new credit card may be offering.

Typically, sign-up bonuses are only available to cardholders of new accounts. With an upgrade or downgrade, you’re maintaining the same account rather than establishing a new one.

Lose points

You may also lose rewards you previously earned with the old credit card.

It’s worth asking your credit card issuer what will happen to your points or miles before you switch cards. Fortunately for me, Chase was willing to let me transfer points to my new card, but that may not always be the case.

Credit utilization ratio

Before upgrading or downgrading your credit card, consider how it might affect your credit utilization ratio.

Your credit utilization ratio is a key component of most credit scoring models. It compares the total credit available to you across all credit cards with the amount of credit card debt you owe. In general, the lower your utilization ratio, the better it could look to potential lenders, with most experts recommending a ratio of less than 30%.

By opening a second card — instead of switching from one card to another — you may be able to increase your available credit. If you typically carry a balance, this may help you lower your utilization ratio.


Bottom line

Savvy credit card users might know when it’s time for a new card.

If you’re not satisfied with your current card, consider upgrading or downgrading before you apply for an entirely new credit account. This could help you save money (or earn more rewards) and continue to build your credit history at the same time.

After all, it can’t hurt to call your credit card issuer and ask what options are available to you. However, make sure to double check that you can keep your original account and whether your issuer requires a hard inquiry, as the processes for upgrading or downgrading credit cards can vary.