Credit Card Downgrades: How and When to Do It

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I spend a lot of time on the blog talking about applying for credit cards, although it may not be the only way to get a credit card that might be on your radar.

In this post, I wanted to talk about another method, which is to switch your credit card product. More specifically, I wanted to focus on “downgrading” to another credit card, which can be a way to reduce the annual fees you pay for cards.

Credit Card Downgrade & Product Switching Basics

The concept is pretty simple. Sometimes you may find yourself in a situation where you have a credit card that you no longer need. In these cases, you can either cancel that card or try to replace the product with another card.

“Downgrading” a card typically refers to exchanging a card with an annual fee for a card with a lower (or no) annual fee. Similarly, you can also “upgrade” a card from a lower (or no) annual fee card to a premium card, although it makes sense in fewer situations.

Switching a credit card is a win-win because you can keep a credit card along with your line of credit without having to apply for a new card.

Over time, the concept of credit card downgrades has become more valuable as card issuers have added restrictions on card approvals, such as: B. Chase’s 5/24 rule. This means that getting approved for a card straight away can be difficult, while switching products can be much more practical.

Frequently asked questions about credit card downgrades and product changes

After a basic explanation, let’s talk about some of the logistical and frequently asked questions related to credit card downgrades and product switching. In no particular order…

Do you get the welcome bonus when you switch credit cards?

Normally you don’t get the welcome bonus on a credit card if you get it by switching products. With a product change, you forego the welcome bonus of a card.

However, credit card companies often have card upgrade offers, so if you want to switch from a basic card to a premium card, there’s sometimes a bonus.

It is typically not as good as the bonus if you apply for a card without changing the product (however, there is no credit check either). Everyone has to decide for themselves which offer makes more sense.

To see what type of product switch offers are available, you can either log into your online credit card account and see if there are any offers, or you can call the credit card company.

Don’t expect the standard bonus when you switch to a map

When can you exchange a credit card?

Usually you can exchange a card if you have had it for at least 12 months. As a rule, you may not exchange a card within the first 12 months as a cardholder.

What happens to your credit history and line of credit when you downgrade a credit card?

Typically, when you downgrade your credit card, you keep your credit limit and credit history, which is good for your credit score. This can be useful for several reasons:

  • Available credit can be the key to minimizing your credit utilization, which will have a positive impact on your credit score
  • An important factor in your creditworthiness is the average age of the accounts, and this is positively influenced by the long retention of credit cards. A credit card downgrade would not be considered a “closure” for these purposes

What credit cards can you downgrade to?

It’s not always that easy. In other words, you cannot simply switch a card to another card from the same issuer. Typically:

  • You can often only downgrade to another card in the same “family” of cards
  • You can only demote a personal card to another personal card and a business card to another business card
  • You can only downgrade a credit card to a credit card and a charge card to a charge card

The only way to know for sure which cards you can switch product to is to call the issuer and ask what’s available for your account, or check your account online (although these are usually upgrade offers rather than showing downgrade offers).

If you’ve owned a card for at least a year, you can often expect to downgrade to another card in the same “family” of cards.

Usually you can change the product within the same “family” of cards

What happens to your credit card rewards when you downgrade a credit card?

This is something you should ask your card issuer about when downgrading, as the answer will vary based on the situation. Typically, when you downgrade a card, you keep your rewards. However, the value of the points may change. For example:

  • Generally, if you have an airline or hotel credit card, you keep your rewards as usual even if you downgrade the card. This is because the points are stored directly with the airline or hotel loyalty program and not with the credit card company
  • If you earned transferable points currency, you would often keep your points, although the redemption value may change; Many transferable points give you more redemption options the higher your card is. So check out my posts covering this about Amex Membership Rewards, Capital One, Chase Ultimate Rewards, and Citi ThankYou
Typically, when you downgrade a card, you keep your rewards

When does a credit card downgrade make sense?

If you no longer want a card, I don’t always recommend downgrading. Sometimes it makes more sense to simply cancel a card. There’s no reason to carry “dead weight” in your wallet.

To me there are a few key circumstances when you should downgrade a card rather than canceling it outright:

  • If you’ve had a card for a very long time it may make sense to downgrade rather than cancel as the average age of accounts is a major factor in your creditworthiness and you can preserve that history by downgrading rather than canceling Map
  • If there’s a card you can downgrade to that gives you actual benefits that you would get value from, it might make sense to downgrade to it. However, you do this best if you don’t think it’s worth applying for the card directly, either because you’re not entitled to the card or you don’t think it’s worth applying for
  • If you’re relatively new to credit cards and have a limited credit history, it might be worth trying to conserve your available balance for a while, so it might be worth keeping a card with no annual fee

What are some examples of credit card downgrades?

If the above is overly complicated or doesn’t quite make sense, let me give you a few examples of when it might make sense to downgrade a credit card.

Let’s say you have the Chase Sapphire Preferred® card (review) and the Ink Business Preferred® credit card (review) and decide you no longer want either of these cards because they both have annual fees. Instead of canceling one of the cards right away, you could potentially:

This would be an excellent option as the cards have no annual fees, have great bonus tiers and you could get the cards even if you broke the 5/24 limit.

This is just one example where something like this might make sense.

Product changing tracking cards might make sense

Get Ultimate Rewards points when downgrading cards

I get a lot of questions about the logistics of upgrading and downgrading cards that may earn Chase Ultimate Rewards points. That’s because both the redemption value and the ability to transfer points vary depending on your Ultimate Rewards card.

For example, sometimes readers have the Chase Sapphire Preferred® Card and wish to downgrade it to Chase Freedom Unlimited® and then apply for the Chase Sapphire Reserve® Card (order is important as you cannot be approved). the reserve if you currently have the Preferred or have received a new card member bonus on it in the last 24 months).

The question is what happens to your Ultimate Rewards points when you downgrade to Freedom Unlimited since you no longer have a card that earns “full” Ultimate Rewards points. The good news is that the process is easy. Let’s take the above scenario as an example:

  • If you convert your Sapphire Preferred to Freedom Unlimited, your points will automatically transfer; However, these points are no longer “full” Ultimate Rewards points, but rather points that can be redeemed for a penny of cashback
  • Once you have claimed the Sapphire Reserve (or any other card that earns Ultimate Rewards points), you can transfer those points back to the card and they become “full” Ultimate Rewards points again

If you’re canceling multiple cards, just make sure you transfer the points first to a card you keep or to a card you swap directly.

If you do this, you will temporarily not have access to the full potential of the points, but this issue will be resolved once you re-open the card that earns Ultimate Rewards points. It’s really a very simple process.

Save your Ultimate Rewards points for great travel experiences

bottom line

If you are not happy with a card you have and are considering canceling it, always make sure you first find out the product change options available to you. It’s not always worth doing, although there are circumstances where it’s a good option.

If you’ve had a credit card for a long time, it may make sense to downgrade rather than cancel it so you can maintain credit history. But beyond that, it can also help you maximize your rewards by switching the product to cards that add value to your portfolio but that you may not be applying for directly.

If you changed or downgraded a credit card’s product, what was your experience?

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