Rather than closing your rewards credit card, you might be able to downgrade to another credit card with a lower (or no) annual fee within your card issuer’s product line. All it takes is a little research and a phone call to your credit card issuer.
Reasons To Downgrade Your Credit Card
There may have been a time when paying a high annual fee was worth it, like if you traveled a lot and needed access to premium travel rewards. However, as the COVID-19 pandemic reduced travel spending in 2020 and 2021, travel-dependent rewards and annual fees might not make as much sense. A pandemic isn’t the only catalyst for reduced spending. Other lifestyle and financial changes—like a job loss or new addition to your family—may warrant spending cuts that no longer justify using a card with an annual fee.
Pros and Cons of Downgrading
Before you make the call to downgrade your credit card, consider both the advantages and disadvantages. You might ultimately decide that downgrading isn’t the best option for you.
Pros Explained
Save money on the annual fee: The biggest advantage of switching to a no-fee credit card is that you save money on the annual fee, which can be more than $400 if you carry a premium travel rewards credit card like the Chase Sapphire Reserve. It makes sense to save on the fee if you can no longer afford it or you’re not able to capitalize on the benefits. May be able to keep your rewards: Downgrading to another credit card within the same card family might allow you to keep the rewards you’ve accumulated and even continue earning rewards. Protect your credit score: Closing your credit card can hurt your credit score if you’ve had it for many years. Downgrading your card instead of closing it allows you to keep the same credit line, and it doesn’t affect the age of the account.
Cons Explained
Lose premium benefits: Downgrading your credit card means you’ll lose access to many perks and rewards that came with the higher-fee credit card. Consider the benefits you have enjoyed before finalizing your downgrade decision.Earn fewer rewards: A no-fee credit card will likely have a lower rewards structure, paying out a smaller number of points for the same amount of spending. If your overall spending has decreased, you’ll find yourself earning only a fraction of the rewards you previously accrued.No welcome bonus on the new credit card: If you were opening up a brand-new rewards card, you could earn a sign-up bonus on your initial spending. You typically won’t have the same opportunity when you downgrade your account. However, because welcome bonuses are available for new cardholders who haven’t opened an account in the past 24-48 months, there’s a chance you wouldn’t qualify anyway.
How To Make the Switch
Before making your final decision, check out your credit card issuer’s website to get an idea of the credit card to which you’d like to downgrade. Once you identify the card you want to switch to, you’ll want to do the following: Once the product change is complete, your credit card issuer will send you a new credit card with a new credit card number. If your annual fee is coming up and downgrading isn’t an option, it may be worthwhile to cancel the credit card completely to avoid the fee—particularly if you can’t afford to pay it.
Examples of Downgrade Options
While every card downgrade requires your issuer’s permission, it helps to know some of the options you have among the major credit card issuers. The following tables use Capital One and Chase cards as examples of what you can expect when you downgrade.
Capital One
Capital One’s downgrade options are easy to spot, because they all share the same feature: the addition of “One” to the name of the card without the higher annual fee:
