Points of View: Should I cancel or downgrade my credit card?

Your bank card’s annual price is due. For one motive or one other, you have determined that it is not price paying the price to maintain your card for one more 12 months. Or perhaps it is a credit card you don’t use, so that you’re contemplating closing the account.

Your first inclination is likely to be to cancel your card. Nonetheless, there are different choices: You might downgrade or product change your card as a substitute.

Questioning what these choices are and the way they work? Let us take a look at what goes into the choice. Then you can also make an knowledgeable option to cancel, downgrade or product change your bank card.

Associated: The cards TPG staffers are keeping, canceling and downgrading

What’s downgrading a bank card?

Downgrading is whenever you change your bank card to a different card incomes the identical sort of rewards however with a decrease (or no) annual price.

Here is an instance: I beforehand held the United Explorer Card however wasn’t flying United a lot, so the $95 annual price (waived for the primary 12 months) wasn’t price it to me. I downgraded this card to the United Gateway Card, which has no annual price.

Associated: When can you downgrade your credit card?


Each playing cards earn United Airways miles, so that they’re in the identical household. I downgraded my card however did not must open a brand new card. I additionally stored my credit score historical past with this card, because it’s thought of the identical account on my credit score report.

It is price noting that not all playing cards have downgrade choices. For instance, you may’t downgrade the IHG Rewards Premier Business Credit Card. That is as a result of there is not any different IHG enterprise bank card, and you’ll’t change between private and enterprise bank cards.

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Associated: Don’t cancel: How to downgrade a Chase credit card

What’s product altering a bank card?

Producing altering means swapping out your present card for one which earns a unique sort of rewards. It is completely different from downgrading, which suggests switching to a different card throughout the similar household, i.e., incomes the identical sort of rewards.

Simply as with downgrading, your account historical past is preserved since you are not canceling your bank card. You can even select a card with a decrease annual price, if that is your objective.

Associated: What is a credit card product change, and when does it make sense?

Each Financial institution of America and Citi will let you product change a bank card to a card that earns a totally completely different sort of rewards.

For instance, I product modified the Air France KLM World Elite Mastercard® to the Bank of America® Unlimited Cash Rewards credit card. In one other occasion, I modified the Citi® / AAdvantage® Platinum Select® World Elite Mastercard® to the Costco Anywhere Visa® Card by Citi.

I used to be in a position to protect my credit score historical past by conserving my accounts open but altering to a card that prices me nothing to maintain it open 12 months after 12 months.

The knowledge for the Air France KLM Mastercard has been collected independently by The Factors Man. The cardboard particulars on this web page haven’t been reviewed or supplied by the cardboard issuer.

Associated: How your credit scores work


Ought to I downgrade, product change or cancel a bank card?

You possibly can cancel your bank card, closing your account completely. Insurance policies differ by financial institution, however you must receive a refund of your annual fee (or at least part of it) if you cancel your card inside 30 days of the annual price posting.

Associated: How to cancel a credit card

Nonetheless, when deciding whether or not to cancel your card or hold it open with a downgrade or product change, contemplate the next:

  • How lengthy have you ever had this card? It’s best to never close or change a credit card before you’ve had it for a year. Moreover, if that is considered one of your oldest bank cards, preserving your credit score historical past is helpful.
  • What choices exist for downgrading or product altering? If you cannot change your present bank card to a different card, this reduces your choices. Know upfront what your choices are to make your retention phone call easier.
  • Should you change to a different card, might that restrict your capacity to obtain a welcome bonus sooner or later? With American Categorical specifically, you may be blocked from receiving a welcome bonus if you happen to’ve had a card previously — even if you happen to solely had that card after a product change and did not obtain a welcome bonus on that card.
  • Do that you must shut a card with this financial institution? Banks like American Express and Capital One have limits on the variety of bank cards you may have with them at anyone time. Should you’re on the most, chances are you’ll want to shut a card earlier than you may open new playing cards and obtain welcome bonuses on these.
  • Should you shut this card, are you able to replicate its advantages with different playing cards? You should not shut or downgrade your solely credit card that provides airport lounge access until you are keen to forgo this profit. Make sure you already know your card’s advantages and if you happen to’ll lose something necessary.
  • What gives would you settle for to maintain this card for one more 12 months? Assume by potentialities upfront so you already know what retention offers you’d and would not settle for.
  • Will you lose your factors or miles? In case your card earns lodge or airline factors, any points already transferred to your loyalty account are safe. Should you’re incomes factors from the financial institution’s program, you could lose points if you don’t have another card that earns those same points.

No matter you determine, it is necessary to recollect that you’re nonetheless chargeable for paying any balances in your card. Plus, you must examine in your closed accounts to make sure there aren’t any sudden prices.

Associated: Quick tip: Check your credit card accounts 30 days after closing them


Backside line

A part of your bank card technique annually needs to be deciding which playing cards you are conserving, closing and altering to a unique card. Quite a few elements go into the choice round canceling, downgrading or product altering a bank card.

Associated: Pros and cons of downgrading your credit cards right now

After contemplating the elements above, you must have a very good understanding of those elements. Now, you can also make an knowledgeable choice about which playing cards will earn a spot in your pockets for one more 12 months.

Editor’s observe: “Factors of View” is a sequence evaluating choices on which bank card to make use of. Should you’re dealing with a dilemma about which card is finest for an upcoming fee, e-mail us at tips@thepointsguy.com with the topic line: “Factors of View query.”

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