Why Upgrading (or Downgrading) Your Credit Card Could Be a Good Move

by Christy Bieber | Published on Aug. 15, 2021

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An older gentleman sits on a park bench, looking at his phone while also holding his credit card.

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This could be a better bet than closing a card or opening a new one.

If you have a credit card that is no longer a good fit for your lifestyle, you may be thinking about canceling that card. That may be especially true if the card has an annual fee that you are paying for, and you no longer feel that the card is providing a good value.

You may also be considering opening a new credit card so you can get one better matched with your spending habits or desired perks.

The problem is, opening or closing credit cards can have consequences for your credit. Keep reading to learn why you may want to consider upgrading or downgrading your credit card instead.

What is upgrading or downgrading a credit card?

When you upgrade or downgrade your credit card, you either switch to a card that offers fewer perks -- but usually charges a lower or no annual fee -- or you change to a rewards credit card that offers more benefits, even if it comes with a higher fee.

The catch is, when you upgrade or downgrade, you do so with the same credit card company that issued your current card. You call up the credit card company and ask if it will allow you to switch to a different card within its lineup. That way, you still preserve your account history.

Most credit card companies offer multiple credit cards. Some of the cards are straightforward and free, while others may have annual fees and provide more cardholder perks. Card issuers will often let you switch between cards in the same family without having to undergo a hard credit check and without losing your credit account history.

So, if you're tired of paying an annual fee, for example, you could downgrade to the entry level, no annual fee credit card in the issuer's lineup. On the other hand, if you want a card with better benefits, you could ask about upgrading, and you wouldn't have to go through a full card application process.

Upgrading or downgrading your card could help preserve your credit score

To understand why you might want to upgrade or downgrade a card, it's helpful to look at the impact of closing old accounts or opening new ones.

If you cancel a credit card, you could end up losing the record of it on your credit report. You'd shorten the average age of your credit history, which could result in a lower credit score. That's because a longer credit history is considered a positive factor in the scoring formula, and all those on-time payments you made would no longer be a part of your past credit record. This would be a shame since payment history is the most important factor in determining your credit score.

On the other hand, opening new accounts can damage your score, too. A brand new credit account on your record can also shorten your average age of credit history, just as closing an old card can. And when you open the new card, you would end up with an inquiry on your record for two years. Hard inquiries can damage your score if you get too many of them.

The consequences of opening or closing an account can be avoided if you upgrade or downgrade your card instead.

Of course, this will work only if there's another card offered by your issuer that's more attractive to you. But it's definitely worth considering before applying for entirely new credit or closing an account. Just make sure to compare credit cards, research your options, and see if there's a card that's a good fit -- then call your creditor and ask them to make a change.

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