Your credit card’s annual fee is due. For one reason or another, you’ve decided it’s not worth paying the fee to keep your card for another year. Or maybe it is a credit card you don’t useso you are considering closing your account.
Your first inclination might be to cancel your card. However, there are other options: You can downgrade or change your card instead.
Wondering what those options are and how do they work? Let’s see what goes into the decision. You can then make an informed choice to cancel, downgrade, or change your credit card product.
Related: TPG employee cards are holding, canceling and downgrading
What is a credit card downgrade?
A downgrade is when you change your credit card to another card to earn the same type of rewards but with a lower (or no) annual fee.
Here’s an example: I’ve hosted in the past United Explorer card but I don’t fly United much, so the $95 annual fee (waived for the first year) isn’t worth it to me. I downgraded this card Flower Gate CardNo annual fee.
Related: When can you downgrade your credit card?
Both cards earn United Airlines miles, so they’re in the same family. I downgraded my card but don’t need to open a new card. I also keep my credit history with this card, as it is considered the same account on my credit report.
It’s worth noting that not all cards have a downgrade option. For example, you cannot downgrade Premier IHG Rewards corporate credit card. That’s because there are no other IHG business credit cards and you can’t switch between personal and business credit cards.
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Related: No Cancellation: How to downgrade a Chase credit card
What is a credit card exchange product?
Making a change means swapping your current card for a card that earns a different kind of reward. It is different from downgrading, i.e. switching to another card in the same system, i.e. earning the same kind of rewards.
Just like downgrading, your account history is preserved because you didn’t cancel your credit card. You can also choose a card with a lower annual fee, if that’s your goal.
Related: What is a credit card product change and when does it make sense?
Both Bank of America and Citi allow you to exchange products from a credit card to a card that earns a completely different kind of rewards.
For example, my product has changed Air France KLM World Elite Mastercard® arrive Bank of America® Unlimited Cash Rewards Credit Card. In another case, I changed Citi® / AAdvantage® Platinum Select® World Elite Mastercard® arrive Citi’s Costco Anywhere Visa® Card.
I was able to maintain my credit history by keeping my accounts open but still switching to a card that cost me nothing to keep it open year after year.
Information about the Air France KLM Mastercard card has been independently collected by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Related: How does your credit score work?
Should I downgrade, change products, or cancel my credit card?
You can cancel your credit card, closing your account permanently. Policies vary by bank, but you should get your annual fee (or at least partial) refund if you cancel your card within 30 days of posting the annual fee.
Related: How to cancel a credit card
However, when deciding to cancel your card or keep it open when you downgrade or change products, consider the following:
- How long have you had this card? You should never close or change a credit card before you have it for a year. Also, if this is one of your oldest credit cards, it is beneficial to keep your credit history.
- What options are there to downgrade or change the product? If you can’t change your existing credit card to another card, this will reduce your options. Know in advance what your options are to make phone calls kept Simpler.
- If you change to another card, will that limit your ability to receive welcome bonus in the future? With American Express especially, you may be blocked from receiving a welcome bonus if you previously had a card — even if you only got it after changing products and did not receive a welcome bonus on it.
- Do you need to close the card with this bank? banks like American Express and capital one There is a limit to the number of credit cards you can carry at any one time. If you are maxed out, you may need to close a card before you can open new cards and get welcome bonuses on them.
- If you close this tag, can you replicate its benefits with other tags? You should not close or downgrade your only credit card that provides airport lounge access unless you are willing to give up this benefit. Make sure you know the card’s benefits and whether you’ll lose anything important.
- What offer would you accept to keep this card for another year? Think ahead about the possibilities so you know what retention offer you will and will not accept.
- Will you lose your points or miles? If your card earns hotel or airline points, any Points that have been transferred to your loyalty account are safe. If you are earning points from your bank’s program, You can lose points if you don’t have another card that earns the same score.
Whatever you decide, it’s important to remember that you are still responsible for paying any balance on your card. Also, you should check your closed accounts to make sure there are no unexpected charges.
Related: Quick tip: Check your credit card accounts 30 days after closing them
bottom line
Part of your credit card strategy each year is deciding which card you’re holding, closing, and swapping out for another. Many factors influence the decision around canceling, downgrading, or changing credit card products.
Related: Pros and cons of downgrading your credit card now
After considering the above factors, you should have a clear understanding of these factors. You can now make an informed decision about which cards will have a place in your wallet in a year’s time.
Editor’s Note: “Opinion” is a series of reviews of decisions about which credit card to use. If you are facing a dilemma about which card is best for an upcoming payment, email us at [email protected] with subject line: “Perspective Question.”
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