Editorial IndependenciaWe want to help you make more informed decisions. Some clearly marked links on this page may take you to a partner website and may earn us a referral fee. For more information, see How we make money.
Upgrading your credit card can be an easy way to earn rewards points and cash back without requesting a new card.
If your current card doesn’t offer spending rewards, you’re essentially missing out on free money and other perks. The right upgrade can get you points and miles for flights and hotels, cash back on groceries, and dining and entertainment rewards, which may not be available with your current card. Credit-building cards, for example, often start with low credit limits and minimal rewards, since they’re designed for newcomers and students.
An alternative to upgrading is to apply for better cards once your credit score is high enough, but that might involve a new credit check, which could temporarily lower your credit score. Plus, a new credit card adds to the hassle if you use your credit card for automatic payments, something an upgrade could help you avoid.
To help you decide what’s best for you, here are a few things to consider when upgrading your existing credit card.
Benefits of updating your credit card
The biggest benefit of upgrading your credit card is that you can access better rewards without, in most cases, undergoing a new credit card application and credit check. This way, you’ll 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 need to go back and reset all of your automatic payments,” says Ted Rossman, senior industry analyst at CreditCards.com, which like NextAdvisor is owned. of Red Companies. “So I would say ease of use is definitely a reason to do this.”
Upgrading a credit card can be a good option for people who are still using a secured credit card and have enough credit history to switch to a card with more rewards. For example, someone who opened a Capital One Platinum Secured Credit Card in college might see 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 update.
Update 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, a CFP® and president of Avance Private Wealth in Delray Beach, Florida. “Most issuers will honor the time you had the original card and roll it over to the next one. This can be helpful for your credit score and can help you get other benefits with the company.”
A big advantage of upgrading your card with the same provider is that you probably won’t see a heavy credit pull on your credit report. “Since you’re upgrading with the same company, they rarely require a full credit application. In most cases, since your information with the company is already on file, it only takes a few additional questions to update your card,” adds Vega.
Those questions may include the issuer requesting your current rent/mortgage payment, your current income information, along with other questions just to get an idea of your financial situation at the time you apply.
Updating your credit card can help you earn points and cash back, and you may not even need to update your autopay settings. Be sure to ask your card issuer for more details.
If you’re wondering how to update a credit card, it’s usually pretty easy: 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 such as your credit utilization and on-time payment history. Based on that information, they’ll decide if you’re approved and then set your credit limit and APR.
Potential drawbacks and considerations
Upgrading your credit card can be beneficial, but there are also some drawbacks to consider.
Right away, ask your credit card company if you’ll need to get a new account when you upgrade your card. If the answer is yes, the issuer will likely need to do a strict credit inquiry, which could drop your credit score by 5-10 points (and stay that way for a few months).
Your credit utilization ratio, the second most important factor in your credit score, can be affected if the new card comes with a lower limit. While this probably won’t happen, you can prevent this change from affecting your score. “You always have the ability to make an extra payment in the middle of the month and bring that balance down before the statement comes out, or ask for a higher credit limit,” says Rossman.
Another drawback worth mentioning is that great rewards credit cards 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 cash back or 2,500 points, so you’ll want to know when you can start using the benefits of your upgraded card.
Pros and cons of updating your credit card
A hard credit check is usually not required
You can transfer your existing credit limit to a new, better card
Opportunity to earn more rewards and perks
You can often keep your credit history age (no need to pay off first line of credit)
The new card may have a higher annual fee and/or APR
Your credit limit may increase or decrease, which will affect your credit score
If there is a hard 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 if you don’t yet qualify for a better card with your issuer, there are a few alternatives you might want to consider.
First, consider asking your credit card company for a lower interest rate. This is especially beneficial if you are paying down debt. Getting a better credit card interest rate can help you lower your monthly payments and pay off your debt faster. Plus, it will put some money back in your pocket.
Similarly, you can ask your card issuer for a higher credit limit. This gives you more buying power and, assuming you can pay off your balance each billing cycle, can have a positive impact on your credit score. Find out if this will result in a thorough consultation, so you can prepare for a temporary drop in your credit score.
Downgrade your credit card
Possible reasons for downgrading may include wanting a lower APR or annual fee (or getting rid of an annual fee altogether), and/or no longer using rewards or benefits.
Keep in mind that you might lose some of the rewards you previously received, 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 work very well together,” says Rossman. “So definitely do your research, ask around, maybe even consider using your rewards before you make a trade. If you’re downgrading your card while paying off debt, remember you can always try to upgrade again once your financial situation improves.”