Last updated on April 11th, 2023
Do you have a credit card account that you no longer use, or perhaps one that you’re not getting enough out of? Rather than letting it sit untouched or continuing to settle for less than what you can earn from it, you may consider switching it for a different credit card. Doing so can open the door to new and possibly more rewarding benefits, a lower interest rate, no annual fee, or any combination of the three. However, transferring your account to a new card isn’t always in your best interest, and you’ll want to consider certain factors before you make your decision. How do you upgrade your credit card?
How it Works
Upgrading or downgrading a credit card is as simple as making a phone call to your card issuer and asking. However, the actual process should involve more steps, especially on your part. Different issuers may handle the case differently, so you’ll want to contact yours and ask how their procedure works before requesting a change of cards. Also, be aware that it’s possible the issuer will decline your request, especially if your account is not in good standing. If you want to move up to a higher-tier version of your current card so you can earn more rewards, for example, but you have a longtime outstanding balance or a history of late payments, you could likely be denied an upgrade. In addition to your account, the issuer may inspect your credit report, especially if you’d like a new card with a higher credit limit. Be aware that a card issuer reviewing your credit report will knock a few points off your credit score since it’s considered a hard inquiry. If you wish to change your card to a different product within the same family, chances are you’ll only be hit with a soft inquiry since your credit limit won’t usually change. Once you’ve done your homework, call your issuer and request the upgrade. If you get the green light, you should receive your new card within a few days.
Why It’s Worth It
Arguably the greatest benefit of upgrading your credit card is having a shiny, new piece of plastic (or metal, in some cases) that will potentially earn you rewards points or cash back and offer several welcome perks. For example: If you started out a few years ago with a secured or student card and have outgrown it thanks to responsible use and a higher income, it’s worth graduating to an unsecured card that will give you something extra as you continue your sensible spending habits. Upgrading – rather than applying for a new card – will spare you the hard inquiry from the issuer, which will keep your credit score intact. Plus, a hard inquiry will remain on your report for two years. Both of these bumps could potentially run you into hardship if you decide to make a substantial financial decision in the future, such as buying a house or a car. In addition to leaving your credit score untouched, maintaining your account active looks good for your credit length. Lenders like seeing that you’ve had accounts open for a substantial time because it paints a more detailed picture of you. Even if you were to apply for a new card instead of upgrading, it’s smart to keep the old card account open and making an occasional small purchase to show that it’s active. There are also benefits to stepping back down to a more basic credit card. If you have a high-end card that’s no longer for you because, say, you don’t use it as much as before or the perks no longer apply to your lifestyle, you might save money by no longer having to pay an annual fee or moving to a lower interest rate. A lower-tier card may also have distinct rewards that could end up benefitting you more, such as a higher earning rate on a specific category that you now spend more money in.
When You Want to Apply for a New Card Instead
In some cases, applying for a new credit card – and having your credit report potentially take a minor hit – is better than upgrading an existing account. One instance involves signup bonuses. If you upgrade or downgrade a card, you won’t be eligible for your new card’s welcome offer because issuers usually restrict them to new applicants. A bonus of 50,000 points, for example, is hard to pass up, especially if you already have a growing stash and you know you can meet the spending requirements. Similarly, a big cash back bonus could go a long way if you’re planning on using it for a special occasion. In these situations, you need to weigh the consequences of choosing one option over another, as there is no definitive answer. In addition to signup bonuses, you could potentially miss out on having your new card’s annual fee waived – an offer that some issuers extend to new applicants. The more credit card accounts you have open, the higher your total available credit. If you keep your spending low, you’ll also keep your credit utilization ratio low, which looks good on your credit report and helps raise your credit score. Switching to a new credit card under the same account won’t alter your available credit unless you request a limit increase, so it doesn’t do your utilization ratio any favors. If this is an aspect of your credit history that you’re trying to improve, you’ll have more success applying for a new card instead of switching.
As with many decisions in life, the correct answer depends on several factors that differ with each individual. Maybe you’re better off upgrading to a different card. Perhaps you’ll enjoy the more long-term benefit of applying for a new card instead. It’s possible that the best scenario is doing both. Regardless of the determination you make, you should always take some time beforehand to evaluate the state of your finances, your lifestyle, and how your spending fits into it all.