When Should You Downgrade A Credit Card?

Filed Under: Credit Cards
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I spend a lot of time on the blog talking about applying for credit cards, though that’s potentially not the only way that you can acquire a credit card that might be on your radar.

In this post, I wanted to talk about another method for doing so, which is product changing your credit card. More specifically, I wanted to focus on “downgrading” to another credit card, in particular cards without annual fees.

This is especially useful when you’re trying to create the perfect credit card portfolio and are finding yourself faced with bank restrictions, like Chase’s 5/24 rule.

What Is Product Changing A Credit Card?

The concept is pretty simple. Sometimes you may find yourself in a situation where you have a credit card that you no longer want. In those cases, you can either cancel that card, or you could try to product change it to another card.

“Downgrading” a card typically refers to trading in a card with an annual fee for a card with a lower (or no) annual fee. Similarly, you could also “upgrade” a card from a lower (or no) annual fee card to a premium card, though there are fewer situations where that makes sense.

Product changing a credit card is a win-win, as it lets you maintain a credit card, along with your credit line, without having to apply for a new card.

Do You Get The Welcome Bonus If You Product Change A Credit Card?

You typically don’t get the welcome bonus on a credit card if you’re getting it through a product change. So by doing a product change you’re forgoing the welcome bonus on a card.

However, credit card companies do often have upgrade offers on cards, so if you wanted to switch from a basic card to a premium card, there is sometimes a bonus.

Typically it’s not as good as the bonus would be if you’re applying for a card without a product change (though at the same time there’s also no credit inquiry this way). Everyone has to decide for themselves which offer makes more sense.

To see what kind of offers are available for a product change you can either log into your credit card online account and see if there are any offers, or you can phone up the credit card company.

When Can You Product Change A Credit Card?

As a general rule of thumb, you can product change a card if you’ve had it for at least 12 months. Typically you’re not allowed to product change a card within the first 12 months.

What Credit Cards Can You Downgrade To?

This isn’t always so straightforward. In other words, you can’t just product change a card to any other card from the same issuer. As a general rule of thumb:

  • You can often only downgrade to another card in the same “family” of cards
  • You can only downgrade 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 product change to is by calling the issuer and asking what’s available for your account, or by looking in your account online, where you may see some upgrade offers.

Generally speaking you can expect that if you’ve had a card for at least a year you can downgrade to another card in the same general “family” of cards.

When Does It Make Sense To Downgrade A Credit Card?

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

To me there are two main circumstances under which you should downgrade a card rather than canceling it outright:

  • If you’ve had a card for a really long time it might make sense to downgrade it rather than canceling it, since average age of accounts is an important factor in your credit score, and you can preserve that history by downgrading rather than canceling a card
  • If there’s a card you can downgrade to that offers you actual perks you’d get value out of, it could make sense to downgrade to it; however, you’re best off doing this when you don’t think it’s worth applying for the card directly, either because you’re not eligible for the card, because you don’t think it’s worth the inquiry, etc.
  • If you’re still fairly new to credit cards and have a limited credit history, it could be worth trying to preserve your available credit, etc., for a while, and therefore might be worth holding onto a no annual fee card

Example Of When It Makes Sense To Downgrade A Card

If the above is too complicated or doesn’t fully make sense, let me give some examples of when it could make sense to downgrade a credit card.

For example, say you have the Chase Sapphire Preferred® Card (review) and Ink Business Preferred℠ Credit Card (review), and decide you no longer want one of those cards, because both carry annual fees. Rather than canceling one of the cards outright you could potentially:

This would be an excellent option since the cards have no annual fees, have great bonus categories, and this would allow you to get the cards even if you’re over the 5/24 limit.

That’s just one example where something like this could make sense.

Downgrading Credit Cards Summary

If you’re not happy with a card you have and are considering canceling it, always make sure you first figure out the product change options available for you. It’s not always worth doing, though there are circumstances where it’s a great option.

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

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Comments
  1. I was hoping for more “meat” to this article. Since the picture showed a Citi Prestige, it would’ve been nice if the discussion about TY Points and downgrading had been addressed (or PC, etc.)

    Also, would’ve been nice to discuss (since it was mentioned) upgrade vs. SUB. I think some card issuers (Amex?) let you get both, but you have to do things in a particular order, AFAIK.

  2. I’m based in Spain and just yesterday I called Amex to downgrade from Platinum to Gold: main benefit 150 EUR bonus for travel, only 1X MR for EUR expense and PPass… As I spend a decent amount I got a contra offer of getting 70K MR if I stayed the rest of the year…
    That can be a MAD – TYO in J so I wept a bit more like a crocodile and accepted 🙂

  3. What about a key reason being limitations issuers put on signing up for other cards if you have opened or cancelled within the family within the past x years. In this case downgrading to a lower-fee card can keep you eligible for other cards in the family without resetting the clock.

  4. If you are downgrading a card (or alternatively using an upgrade/special offer on a card), does that reset the history/start date for that card? I have a card that I’ve kept for awhile because its my oldest card so beneficial to my credit rating. However, I’ve been thinking of downgrading or changing it but am concerned if I do so that it will be treated as a closed credit card and the new card would have a current date. Just wondering if you now how these are treated for your credit?

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