Is It Ever a Smart Idea to Upgrade Your Credit Card?

If you have a credit card that is cobranded with a certain airline or hotel chain, there's a good chance that there is more than one "level" of the card. For example, several airline credit cards have tiers designed for occasional travelers, semi-frequent travelers, and people who travel all the time.

It's a common practice for companies to ask customers if they'd like to upgrade their cards to a higher level. If you feel that the more feature-packed card is a good fit for you, should you accept the upgrade offer or apply directly?

What does it mean to upgrade your credit card?

Several cobranded credit cards, especially those offered in partnership with airlines, are offered in more than one version. For example, if you fly on American Airlines occasionally, you might use the mid-tier Citi® / AAdvantage® Platinum Select® World Elite Mastercard®, which has a , and helps you earn miles and comes with other travel benefits. On the other hand, if you're a frequent traveler, the Citi® / AAdvantage® Executive World Elite Mastercard® comes with perks such as airport lounge access but has a much higher $595 annual fee.

To boost fee revenue and expand customer relationships, credit card issuers often send their customers upgrade offers to move from one credit card into a more feature-packed one. It doesn't need to be a cobranded credit card, either. Banks offer upgrades to different products, and for different reasons.

I already mentioned the desire to "upsell" customers to a more expensive product. It's also common to get upgrade offers if a particular credit card is discontinued for new members -- for example, I still have the lower-tier Gold version of the Citi AAdvantage card (which you can no longer apply for), and I receive offers to move to the Platinum version often. Credit card companies also regularly send upgrade offers when they release new credit card products, to speed up adoption.

Reasons an upgrade can be a good idea

There are a few reasons to consider a credit card upgrade offer. For one thing, you can usually get the new product without a separate hard credit check, which would almost certainly be a requirement if you applied for the new card directly. Plus, you won't have to close an old credit card in this way, so it can be generally better for your credit score.

An upgrade can also be a good way to get new card benefits. If you're satisfied with your current card, and think you'd get value from upgrading to the next level, accepting an offer to do so can be a seamless way to replace your current benefits with new ones.

Reasons not to upgrade

When you get an upgrade offer, you might get some sort of bonus from the credit card company. Maybe you'll get a certain number of points or miles, or the company will agree to waive the annual fee for the first year.

However, the offer you get for upgrading is almost always lower than what you'll get from applying for the card directly. And sometimes, the upgrade offer doesn't come with a bonus at all -- it's just simply exchanging one credit card for another.

Using my personal example about being asked to upgrade from my Gold-level American Airlines card to the Citi® / AAdvantage® Platinum Select® World Elite Mastercard®, the offer never comes with any sort of bonus. Meanwhile, if I simply applied for the Platinum version of the card directly, I could get 75,000 miles (worth at least $500) after meeting spending targets (terms apply).

Is saving a potential ding on your credit score worth $500? Maybe, but most likely not.

The bottom line

Like most other financial decisions, there isn't a perfect answer for everyone. In some cases, it could make sense to accept an offer to upgrade an existing credit card, especially if you're worried about the hit to your credit score. On the other hand, you might be able to get a better welcome offer by simply applying for the new credit card directly and closing the existing one (if you want to). And of course, it depends on the specifics of the upgrade offer you get.