Credit cards are a convenient option to make payments online and in stores. These days, you can get a credit card for nearly anything, from a local store credit card to travel rewards credit cards or cash back. You might have heard friends or family members discussing credit card points for free vacations or an extra $100. If that leaves you wondering "Should I upgrade my credit card," read on for a complete overview of why you might choose to upgrade.
What is a Credit Card Upgrade?
Upgrading your credit card usually refers to getting a new credit card with better rewards from the same card issuer in the same credit card line. This can mean you opt for a new card with better benefits, a higher rewards rate and, in some cases, a higher annual fee. You can consider different types of credit cards.
For example, Chase has a card called the Chase Sapphire Preferred, the higher-end card in the same line is the Chase Sapphire Reserve, one of the best travel rewards cards. On the other hand, getting a different credit card from Chase, such as the United Airlines card, will be considered a new card and not an upgrade.
What Are the Pros and Cons of Upgrading Your Credit Card?
Upgrading your credit card to balance the higher bonuses or rewards versus possible higher credit limits has advantages and disadvantages. Here's what you want to consider.
Pros
- Higher rewards
- New rewards
- Higher credit limit
- Credit score boost with a higher credit limit
- Greater flexibility
Cons
- Possible higher annual fees
- Rewards may not be worth the upgrade
- Loss of other benefits like cash back with an upgrade
Key Factors to Consider Before Upgrading Your Credit Card
You should consider various factors before upgrading a credit card. For example, many credit cards offer attractive rewards and bonuses when you sign up for a new card. If you upgrade, you may become ineligible for the bonus. The upgrade can be more than worth it for the extra points on each dollar you spend. Here are additional factors to consider.
Credit Score and Credit History
When you upgrade to a new credit card from the same card issuer, it usually doesn't require a hard credit pull. For that reason, you shouldn't see a dip in your credit score. If the upgraded card has a higher credit limit, you might see a boost in your credit score. If you've got a lower credit score, you could still upgrade to a premium credit card from your existing credit card, opening better bonus opportunities.
Applying for multiple new credit cards can cause a dip in your credit score, so it's better to spread out new credit card applications and limit them to two to three annually.
Current Card Benefits and Features
Before applying for a credit card upgrade, weigh the current card benefits, features and annual percentage rate (APR). You'll also want to take a realistic look at how you use the card. If upgrading to a rewards credit card gives you 10 times points on travel bookings, but you travel rarely and spend $500 a year on travel, those points won't go as far as a card with rewards for everyday expenses like gas or groceries.
When it comes to upgrading credit cards, you'll want to consider the benefits, like additional bonus points or a higher credit limit, with the downsides, like a higher annual fee. As an alternative, if you decide the current rewards fit your lifestyle, you could ask for a credit limit increase.
Rewards and Cashback Offers With the New Card
In most cases, applying for a new credit card will give you access to better rewards or sign-up bonuses than upgrading an existing card. From 60,000 bonus miles worth up to $800 to cash rewards worth $100 to $500 when you meet certain spending limits, getting a new credit card can help maximize bonus offers. Learn more about comparing credit cards.
Annual Fees and Interest Rates of the New Card
Consider the annual fees and interest rates of the new card, especially if you carry a balance on the card. An annual fee of $495 is only worth it if you take advantage of the additional offers and credits. Even an annual fee of $95 isn't worth it for basic rewards. Consider the dollar value you expect to earn from the card versus the annual fee.
Also, note that some credit card issuers will waive the annual fee for a year when you apply for a new credit card. In that case, it can make sense to try the card for a year to see whether the rewards match your lifestyle and spending habits.
Spending Patterns and Habits
When considering a credit card upgrade or applying for a new one, it's important to understand your budget to find the spending categories where you can earn the greatest rewards. While some credit cards offer 1% cash back on all purchases, others offer better rewards or points in certain categories like travel, groceries, gas or rotating categories. Choose a card that matches your spending habits and lifestyle. Learn more about how to use a credit card and how many credit cards you should have for your lifestyle.
Credit Utilization Ratio
Your credit utilization ratio is the percentage of total available credit you use. In general, a credit utilization ratio of 30% or less is considered good. If you upgrade your credit card or request a credit line increase, you can lower your credit utilization ratio, potentially boosting your credit score.
How to Upgrade Your Credit Card
To upgrade your credit card, the simplest option is to call the phone number on the back of the card and request a credit card upgrade. Remember that you can always negotiate. Ask about new membership signup bonuses or cards with additional benefits. If you qualify for a credit card upgrade, the card issuer should be able to help you finalize it quickly. You'll typically get the new card in the mail within three to five business days.
Exploring Alternative Options
Alternative options for upgrading your credit card are:
- Apply for a new card: If you qualify, you'll get any available signup bonus or the possibility of other perks like new rewards or a 0% introductory APR,
- Ask for a credit line increase: Some banks allow you to do this online, while others ask you to call for the credit line increase. This can give you the benefit of a lower credit utilization ratio and more flexible spending limits.
- Downgrade your credit card: In some cases, the annual fee doesn't justify the rewards. In that case, you could ask to downgrade the credit card with your card issuer without affecting your credit score or losing your current line of credit.
Getting a Credit Card Upgrade
Upgrading your credit card is a way to access better rewards, a higher credit limit or additional bonuses without a hard credit check. But you'll miss out on signup bonuses worth $200 to $800 or more. Should you get a credit card upgrade? You can review the checklist above and consider your spending habits, financial goals and current credit cards to find the best solution for your situation.
Frequently Asked Questions
Does upgrading your card affect your credit score?
Upgrading your credit card won’t affect your credit score directly. But an increased credit limit can help your credit score, and paying the credit card on time each month will help build a positive credit history.
Can I upgrade my credit card to a different one?
Yes, you may be able to upgrade your credit card to a different one. You’ll need to speak with the credit card issuer to understand the options.
What happens to an old credit card after an upgrade?
After upgrading a credit card, the old credit card will usually be canceled or voided. In many cases, you will receive the new credit card number immediately, and the card should arrive in the mail within a few business days.
How often should you change credit cards?
There’s no right answer to how often you should change credit cards. Keeping your oldest credit card account open can be beneficial to your credit score. If you’re looking to maximize credit card rewards, consider opening a new credit card once a year.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.