Upgrading your credit card can be an easy way to earn rewards points and cash back without applying for a new card.
If your current card doesn’t offer spending rewards, you’re essentially missing out on free money and other benefits. The right upgrade can earn you points and miles for flights and hotels, cash back on groceries, and rewards on dining and entertainment that might not be available with your current card. Credit cards, for example, often start out with low credit limits and minimal rewards because they’re designed for newcomers and college students.
An alternative to upgrading is to apply for better cards once your credit score is high enough, but this might involve a new credit check, which could temporarily lower your credit score. Plus, a new credit card increases the hassle if you use your credit card for automatic payments — which an upgrade could help you avoid.
To help you decide which is best for you, here are some things to consider when upgrading your existing credit card.
Benefits of Upgrading Your Credit Card
The biggest benefit of upgrading your credit card is that you can access better rewards without, in most cases, going through a whole new credit card application and credit check. This way, you continue to build your credit history with your current card issuer while enjoying more benefits and savings.
“In many cases, you won’t even need a new card number, so you don’t have to go back and reset all your automatic payments,” says Ted Rossman, senior industry analyst at CreditCards.com, which, like NextAdvisor, is owned by Red Companies. “So I would say ease of use is definitely a reason to do it.”
Upgrading a credit card may be a good option for people who are still using a secured credit card and have enough credit history to upgrade to a card with more rewards. For example, someone who opened a Capital One Platinum Secured Credit Card in college might check out some of the best Capital One rewards cards after spending a few years building their credit score. They could then call the issuer to request an upgrade.
Upgrading your credit card with the same issuer
Credit checks are required for new card applications each time you open a second credit card. But when you upgrade, it’s a bit different.
“When you upgrade a card, you’re not canceling one card in favor of another,” says Adam Vega, CFP® and president of Avance Private Wealth in Delray Beach, Florida. “Most issuers will honor the time you got the original card and roll it into the next one. This can be helpful for your credit score, and it can help you earn other benefits with the card. ‘business.
A big advantage of upgrading your card with the same provider is that you probably won’t see any hard credit on your credit report. “Since you’re upgrading with the same company, they rarely need a full credit application. In most cases, because your information with the company is already on file, only a few more questions are needed to upgrade your card,” adds Vega.
These questions may include the issuer requesting your current rent/mortgage payment, updated income information, and other questions just to get an idea of your financial situation at the time of the request.
Upgrading your credit card can help you earn points and cash back, and you might not even have to update your autopay settings. Be sure to ask your card issuer for details.
If you’re wondering how to upgrade a credit card, it’s usually quite simple: call the 1-800 number on the back of your card and speak to a customer service representative. You can also submit a request through your credit card account’s online portal. The card company will review your accounts and credit score, likely looking at factors like your credit usage and on-time payment history. Based on this information, they will decide if you are approved and then set your credit limit and APR.
Potential Disadvantages and Considerations
Upgrading your credit card can be beneficial, but there are also some downsides to consider.
Right off the bat, ask your credit card company if you’ll need to get a new account when you update your card. If the answer is yes, chances are the issuer will need to do a serious credit check, which could drop your credit score by 5-10 points (and stay that way for a few months).
Your credit utilization rate, the second most important factor in your credit score, can be affected if the new card comes with a lower limit. Although this probably won’t happen, you can prevent this change from affecting your score. “You always have the option of making an extra payment mid-month and reducing that balance even before the statement is released, or requesting a higher credit limit,” Rossman says.
Another downside to mention is that credit cards with great rewards aren’t always free. You may have to pay an annual fee to open a rewards credit card. Ask your card issuer about the fees associated with a new card before making the switch.
Some cards may also have minimum redemption requirements, such as $25 for cash back or 2,500 points, so you’ll want to know when you can start using your upgraded card benefits.
Pros and Cons of Upgrading Your Credit Card
Usually no credit check is required
Can convert existing credit limit to a new, better performing card
Opportunity to earn more rewards and benefits
Can often retain your credit age (no need to cancel first line of credit)
The new card may have a higher annual fee and/or APR
Your credit limit can go up or down, which impacts your credit score
If there is a rigorous credit check, it could affect your credit score (always ask)
Alternatives to Upgrading Your Credit Card
If you think a credit card upgrade isn’t right for you, or you haven’t yet qualified for a better card with your issuer, there are some alternatives you can consider.
First, consider asking your credit card company for a lower interest rate. This is particularly advantageous if you are repaying a debt. Getting a better interest rate on credit cards can help you lower your monthly payments and pay off your debt faster. Plus, it will put some money back in your pocket.
Likewise, you can ask your card issuer for a higher credit limit. This gives you more buying power and, assuming you’re able to pay off your balance each billing cycle, it can have a positive impact on your credit score. Find out if this will result in serious investigation, so you can prepare for a temporary drop in your credit score.
Downgrading your credit card
Potential reasons for downgrading may include wanting a lower APR or annual fee (or dropping the annual fee altogether), and/or you are no longer using the rewards or benefits.
Remember that you might lose some of the rewards you received previously. So try to use them before downgrading. “If you have a card from an issuer that’s really more of a travel card and then you switch to a cash back card, sometimes those reward structures don’t really work well together,” Rossman says. “So investigate, ask, maybe even consider using your rewards before making a change. If you downgrade your card while you’re paying off debt, remember you can always try to downgrade your card once your financial situation improves.