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 option in the range of the card issuer.

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

How does a credit card downgrade work?

When you downgrade a credit card, you are replacing your card with a card with a lower annual fee from the same card issuer.

Usually, to change your credit card, you have to cancel your old card and apply for a new one. Both of these can lower your credit score. However, when you downgrade a credit card, your credit is not affected.

Card issuers only allow you to switch to credit cards from the same product line. However, it is not always clear which credit cards qualify. If you are unsure, the best option is to contact the card issuer.

For example, imagine that you have the Chase Sapphire Reserve®, which results in high annual fees. You no longer want to pay this annual fee. Here are some examples of downgrade options:

  • You can switch to Chase Sapphire Preferred® Card which has a much lower annual membership fee. Both cards, obviously, are in the Chase Sapphire line.
  • You can upgrade to a Chase Freedom card with no annual fee, such as the Chase Freedom Flex℠. It might seem confusing that Chase will let you switch from a Sapphire card to a Freedom card, but it will.
  • You could not downgrade to Marriott Bonvoy Boundless ™ Credit Card. While the Chase Sapphire and Chase Freedom cards are part of the same product line, the Chase Marriott Bonvoy cards are not part of the same line.

What Are the Benefits of Downgrading a Credit Card?

The advantages of downgrading a credit card are as follows:

  • It is less expensive : Your new credit card will have a lower annual fee than the old one. There may be no annual fee at all if you switch to a credit card with no annual fee.
  • You keep your credit account open: Although you have a different credit card, it will be considered the same credit account. This is 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 improve your credit. You will also always have his line of credit to use. More credit available can help you maintain a lower credit utilization rate, another factor in credit score.
  • There is no credit check: When you open a new credit card, your credit score can be changed in two ways: The application itself requires a serious credit investigation, resulting in a slight drop in the credit score. And a new credit account lowers the average age of your credit accounts. If you downgrade a credit card, you can avoid both issues.

What are the disadvantages of downgrading a credit card?

The disadvantages of downgrading a credit card are:

  • Less advantages: You sacrifice benefits when you downgrade a credit card. You will need to decide whether the money you save is worth what you give up.
  • No introductory offers: In most cases, you can’t get introductory offers when you downgrade a credit card. If your new card offers a special introductory 0% APR on purchases, that’s probably only available to new cardholders, not existing cardholders who are downgrading. The same goes for signup bonuses.

You may also run into a problem if you downgrade a credit card too early. Card issuers sometimes frown on consumers who open cards and downgrade them in the first year. This can be thought of as a form of gambling in the system – getting a card, usually for a signup bonus, then downgrading it before the annual fee is applied. American Express states in its card terms and conditions that it can collect bonuses and close the cardholder’s account if the card is downgraded within 12 months.

Some credit card companies do not allow you to downgrade a credit card in the first year at all. For added security, even if you are allowed to do so, avoid downgrading a credit card until it has been in existence for a year or more.

How to downgrade a credit card

Here’s the quick and easy process to downgrade a credit card:

  1. Choose your new credit card. Keep in mind that your new card must come from the same card issuer and product line as your current card. Contact your card issuer by phone or chat if you want to know what your downgrade options are.
  2. Call the card issuer and request 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 phone number of the card issuer. When speaking to a representative, let them know you want to downgrade your credit card and let them know which new card you want.

The card issuer can approve or deny the downgrade. Downgrades are usually successful, as you move down the range of the card issuer.

If the downgrade is approved, the card issuer sends you a new card by mail. In most cases, the card number does not change, so you can continue to use 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 think you’re getting your money’s worth, a downgrade might be the way to go.

Here are the typical situations in which you should consider downgrading a credit card:

  • You don’t use the map a lot: If you don’t take advantage of the card’s benefits or earn lots of rewards, it doesn’t make sense to keep it.
  • You’ve found a better option: Sometimes it’s not that you are no longer using the card, it’s that you have found another card that works better for you. Since you probably don’t need two credit cards with similar features, you can downgrade the one you no longer need.

In either case, you can also close the credit card. Canceling isn’t necessarily a bad decision if you no longer need the card.

You have options when you don’t want to pay the annual fees for a credit card. A downgrade is ideal when you don’t want to completely lose the credit card account.

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