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How to Downgrade a Credit Card

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If you want to avoid the annual fee on a credit card, canceling isn't your only option. You can also downgrade your credit card by swapping it for a lower-end option in the card issuer's lineup.

In many cases, a downgrade is a better choice than canceling a credit card. Here's a detailed look at downgrading a credit card and figuring out if it's the right way to go.

How does downgrading a credit card work?

When you downgrade a credit card, you switch your card for one with a lower annual fee from the same card issuer.

Usually, to change credit cards, you'd need to cancel your old card and apply for a new one. Both of those can reduce your credit score. When you downgrade a credit card, however, your credit is not affected.

Card issuers only let you downgrade to credit cards in the same product line. However, it's not always obvious which credit cards qualify. If you're not sure, the best option is to contact the card issuer.

For example, imagine you have the Chase Sapphire Reserve®, which carries a hefty annual fee. You don't want to pay that annual fee anymore. Here are some examples of downgrade options:

  • You could downgrade to the Chase Sapphire Preferred® Card which has a much lower annual fee. Both cards, obviously, are in the Chase Sapphire line.
  • You could downgrade to a no-annual-fee Chase Freedom card, such as the Chase Freedom Flex℠. It may seem confusing that Chase will let you go from a Sapphire card to a Freedom card, but it will.
  • You couldn't downgrade to the Marriott Bonvoy Boundless® Credit Card. While Chase Sapphire and Chase Freedom cards are part of the same product line, Chase Marriott Bonvoy cards aren't in that same line.

What are the benefits of downgrading a credit card?

The benefits of downgrading a credit card are:

  • It's less expensive: Your new credit card will have a lower annual fee than the old one. It might not have an annual fee at all if you move to a no-annual-fee credit card.
  • You keep your credit account open: Although you'll have a different credit card, it will be considered the same credit account. That's especially important because the age of your credit accounts is a factor in your credit score. When you downgrade a credit card instead of canceling it, the account keeps getting older, which will help your credit. You'll also still have its credit line to use. More available credit can help you maintain a lower credit utilization ratio, another credit score factor.
  • There's no credit check: When you open a new credit card, there are two ways your credit score can be dinged: The application itself requires a hard credit inquiry, which causes a slight credit score drop. And a new credit account lowers the average age of your credit accounts. If you downgrade a credit card, you can avoid both concerns.

What are the drawbacks of downgrading a credit card?

The drawbacks of downgrading a credit card are:

  • Fewer benefits: You sacrifice perks when you downgrade a credit card. You'll need to decide if the money you save is worth what you're giving up.
  • No introductory offers: For the most part, you can't get introductory offers when you downgrade a credit card. If your new card offers a special 0% intro APR on purchases, that's likely only available to new cardholders, not existing cardholders who downgrade. The same is true with sign-up bonuses.

You may also face a problem if you downgrade a credit card too early. Card issuers sometimes frown on consumers who open cards and downgrade them within the first year. This can be considered a form of gaming the system -- getting a card, usually for a sign-up bonus, and then downgrading it before the annual fee comes around. American Express states in the terms and conditions for its cards that it may take back bonus rewards and close the cardholder's account if the card is downgraded within 12 months.

Some credit card companies won't let you downgrade a credit card at all in the first year. To be safe, even if you're allowed to, avoid downgrading a credit card until you've had it for a year or longer.

How to downgrade a credit card

Here's the quick, simple process to downgrade a credit card:

  1. Choose your new credit card. Keep in mind your new card needs to be from the same card issuer and in the same product line as your current card. Reach out to your card issuer by phone or chat if you want to know what your downgrade options are.
  2. Call the card issuer and ask for the downgrade. With most credit card companies, you need to call to downgrade or upgrade a credit card. Check the back of your credit card for the card issuer's phone number. When you speak to a representative, let them know you want to downgrade your credit card, and tell them which new card you want.

The card issuer can approve or deny the downgrade. Downgrades are usually successful, given that you're moving down in the card issuer's lineup.

If the downgrade is approved, the card issuer mails you a new card. In most cases, the card number doesn't change, so you can continue using your old card until the new one arrives.

Should I downgrade my credit card?

The decision to downgrade a credit card ultimately depends on whether you think the annual fee is worth it. If you don't feel you're getting your money's worth, a downgrade could be the solution.

These are the typical situations when you should consider downgrading a credit card:

  • You aren't using the card much: If you aren't taking advantage of the card's perks or earning many rewards, then it doesn't make sense to keep it.
  • You've found a better option: Sometimes it's not that you aren't using the card anymore, it's that you've found another card that works better for you. Since you probably don't need two credit cards with similar features, you could downgrade the one you no longer need.

In either case, you could also close the credit card. Canceling isn't necessarily a bad decision if you don't need the card anymore.

You have options when you don't want to pay a credit card's annual fee. A downgrade is ideal for when you don't want to lose the credit card account entirely.

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