When times are good, it’s easy to forget your credit card benefits or ignore the fact that you’re paying an annual fee to use a credit card. But with recent inflation and higher interest rates, the idea of keeping an ill-fitting card may make no sense. Instead of closing it though, consider downgrading your card.
What is a credit card downgrade?
Credit card upgrades and downgrades refer to the process of switching from one credit card to another within the same bank or financial institution. While credit card upgrades involve moving to a card with better features, downgrades involve switching to a card with fewer perks or benefits.
Reasons you might downgrade your card
Changing financial circumstances. Life is unpredictable and financial situations change. Maybe you recently experienced a job loss, a pay cut, or a significant increase in expenses. Downgrading your credit card can help you adapt to these changes by reducing your credit card’s annual fees or interest rates.
Reduce annual fees. Annual fees can take a toll on your budget, especially if you’re not fully utilizing the benefits and rewards of your current credit card. Downgrading to a card with a lower or no annual fee can help you save money without sacrificing the convenience of having a credit card.
Maximize rewards. Credit card perks and rewards programs vary widely. If your current credit card’s rewards no longer align with your spending habits or lifestyle, it might be time to consider a downgrade. By switching to a card with rewards that better suit your interests, you can make the most of your credit card usage.
Advantages of downgrading
One of the significant advantages of downgrading is the potential to save money on annual fees. You can maintain a credit history with the same bank or financial institution while benefiting from a more suitable card for your current financial situation. Many banks will keep your credit limit at the same level, so you won’t have to worry about increased credit utilization tanking your credit score. Plus, the bank likely won’t pull your credit – which can affect your credit score as well – to downgrade your card.
Disadvantages of downgrading
Downgrading might mean losing some of the premium perks and benefits offered by your current credit card. For example, you may lose access to airport lounge passes, travel insurance, or higher rewards rates.
Research potential cards
When considering a downgrade, research and identify credit cards offered by your bank that have lower annual fees or lower interest rates. Look for cards that will still provide you with the essential benefits you require while eliminating those that no longer serve you. Make sure you meet the card’s eligibility requirements, such as any specific income or credit score criteria.
Make the call
While sending an email is much simpler than being on hold and talking to a rep, this is one time a phone call may yield benefits. Like negotiating cable or internet costs, tell the rep you’re considering leaving because your card has an annual fee you no longer want to pay or because you no longer need the provided benefits. Ask them to tell you about their best offers to retain you as a customer. Maybe they will offer something you weren’t able to discover in your research.
Request a downgrade
If they don’t offer a better solution, ask about how you can downgrade your card and mention one or two of the options you found during your research. Make sure to let them know that you want to keep your current credit limit, and even ask if you may qualify for rewards offered to new card holders. If you’ve been a long-term customer, bring that to their attention as well. Finally, make sure that any points or miles you have accumulated won’t be lost.
After you receive your new card
Don’t forget to transfer any automatic payments or accounts to your new card! Double-check your bills, subscriptions, and online accounts to ensure a hassle-free billing experience moving forward.
As your financial needs change, a credit card downgrade may be a smart solution instead of closing the account. With a little legwork on your part, you should be able to easily transition to a credit card that makes more sense for your life right now.
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