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Upgrading your credit card
Applying for a new credit card may not be your only option.
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Did you know you could get a better card than the one you currently own without having to apply for it? This is known as a credit card upgrade. Most common upgrades happen when you own a secured credit card and the bank offers you an unsecured version of the same card. But you could also ask for a card with rewards or with a higher rewards rate than what you already earn.
The drawback? You may not be eligible to earn a second signup bonus.
How to upgrade your credit card
There are typically two ways to switch credit cards with the same company:
- Automatically. Some credit card providers will review your card activity and upgrade your card automatically. This is often the case with secured credit cards where the provider decides to refund your secured deposit but lets you keep the card. You might also receive an “upgrade” if your card’s benefits and terms are refreshed by the issuer.
- Product change. The other way to upgrade is to ask your provider. Asking specifically for an upgrade on your credit card is referred to as a product change. Most credit card companies do place some limitations on your upgrade options. For example, if you have an airline card with an issuer, you might only be able to upgrade or downgrade among other similar airline cards in the catalog. The most common reason to request an upgrade is to seek out better rewards or terms on your spending.
What to consider before you make an upgrade
Keep the following in mind if you are the one requesting the upgrade:
- Weigh the benefits. See whether you’ll pay an annual fee, higher interest rates or if you get features such as rewards programs on your new card. If the value of the extra features doesn’t outweigh the cost of the annual fee, you might want to reconsider.
- Mind any welcome offer limitations. If your bank offers a 0% intro APR on balance transfers or a signup bonus on a card, remember that these features are usually only available to new customers, not existing ones. As someone upgrading their card, you’re unlikely to qualify for the offer.
Is a credit card upgrade treated as a new account?
Yes and no. If your card upgrade is automatically performed by your issuer — such as in the event of a product refresh or an issuer switching networks — your new card is not treated as a new account.
If you choose to upgrade (or downgrade) through a product change however, your issuer will treat this as though you’re applying for a new product. In this case, they’ll perform a hard pull on your credit report and open a new account for you if approved.
Take note that a product change does not necessarily close your old account. This means you can continue to use your old card, even after you’ve “upgraded” to the new one.
Getting a credit card with a new provider
If you can’t find a more appealing credit card with your current provider, you can apply for a better card from another bank or credit union.
What to consider before getting a credit card with a new bank
Providers are often more generous to new clients, so keep in mind the following:
- If you want to make a balance transfer, you could get a 0% intro APR period. Card providers offer this perk to clients coming from other, non-affiliated banks or credit unions.
- If you want to earn a signup bonus offer, getting a card from another provider could be the right choice.
- Apply for a new credit card often comes with a hard pull on your credit. This can slightly affect your credit score.
- Make sure you compare the standard costs and features of the card before you apply for a card with a new provider.
Things to be aware of before changing your credit card
Think about features, price, access to promotional offers and eligibility before you upgrade your credit card.
- Do you have debt?
Unless you want to make a balance transfer, pay down as much of your credit card debt as possible before applying for a new card. A high debt might reduce your chances of approval when the bank is assessing your ability to repay. - How will this impact your credit score?
Too many applications for credit in a short space of time is a red flag for creditors. Make sure you apply only for the card you really want to get. - What are the costs?
If you’re upgrading to a rewards credit card with an annual fee, make sure the value-adding features are worth the extra cost and that you’ll be using these features. - Will you close your old account?
If you’re upgrading to a credit card with a different issuer, make sure you decide whether you want to close the account after you’ve made the switch. If you have debt remaining on the card, you’ll have to keep it open until you’ve paid it off. If you’ve conducted a balance transfer or paid your debt off, you could consider closing it. Keep in mind, closing your oldest credit card will shorten your credit history and could affect your credit score.
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When should I get a new credit card?
Shopping around for a new credit card doesn’t necessarily mean you’re unhappy with your current one. Sometimes, there’s just a better fit out there. Here are some times when you might want to consider getting a new credit card.
- Your daily routine has changed. It’s a good idea to make sure your rewards are maximized to match your daily spending habits. For example, maybe you used to walk to work, but you recently got a new job and now have a long commute. In that case, getting a credit card that rewards travel spending could pay off.
- Your income has increased. If you’re making more money, you may be able to afford a card with better perks and more favorable terms. While a $95 annual fee might have been out-of-reach with your first job, as your income grows it’s worth looking into cards with higher annual fees as the rewards could pay off in the long run.
- Your credit score improved. Perhaps you’ve been working hard to build up your credit score after a series of financial mishaps. Once you’ve strengthened your standing, it’s worth researching whether or not you’re eligible for a card with elevated benefits.
- Your family life has significantly changed. Adding kiddos to the family, or even getting married, can shift your priorities and financial needs. For instance, if you’re saving for a honeymoon vacation, opening a credit card with travel rewards may help you afford that lovebird escape. On the other hand, a credit card that offers maximum cash back may be more important if kids come along and stretch your budget for discretionary spending.
- You want to take advantage of a signup bonus. If your credit score is stable and it makes financial sense based on your budget, sometimes an excellent signup bonus is a good enough reason to open a new credit card. Just keep in mind that most signup bonuses require you to spend a minimum amount in a set period of time, so be sure to read the fine print before applying.
Bottom line
There is a lot to need to think about before upgrading your credit card. Doing your research and comparing your credit card options beforehand will help you make the right choice and ensure you’re getting the most value.
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