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Managing the points and miles earning credit cards in your wallet is a crucial component of maximizing rewards travel. It requires a careful assessment of each card to ascertain if the benefits and points earned outweigh the annual fee, and determining if the card lines up with your current travel goals.
Reasons to Downgrade or Cancel a Credit Card
There is any number of reasons you might want to downgrade or cancel a credit card. These can include:
- A shift in your rewards strategy i.e. focusing on a different loyalty program to achieve a specific travel goal.
- Changes to a rewards program attached to the card where it no longer aligns with your rewards strategy, for example, the loss of a transfer partner.
- A reduction of bonus categories, benefits, or the points earning power of the card.
- A change in personal circumstances such as a new job or welcoming a new addition to the family.
- The fee outweighs the value you're receiving from the card benefits.
- Moving to a new location which necessitates a change of preferred airline or hotel chain.
- A new rewards card entering the market that aligns more closely with your travel goals and spending habits.
If you decide a card is no longer needed or has been made redundant due to new products entering the market, the next step is deciding whether to cancel the card or downgrade it to another product that doesn’t attract an annual fee.
Downgrade a Credit Card vs. Canceling a Credit Card
Deciding the fate of card's that don't make the cut can be a tricky business, as there are several ingredients to factor in.
You want to ensure that any points earned on the account don’t get wiped out from making the wrong call, that you can still use and transfer points and miles in a way that offers a decent return, and perhaps the most important, you need to consider how closing or downgrading the card will affect your credit score.
Before deciding to downgrade or cancel a credit card, it’s worth calling the credit provider to see if there are any promotions available on your card that might convince you to keep it. If the bonus provides enough value, it might make sense to hang onto it in the meantime.
If there are no promotions available, there are a few things to consider.
Can the card be downgraded? Some cards such as the Chase co-branded cards cannot be downgraded or converted to a card from any other loyalty program, or to an Ultimate Rewards-earning card. Additionally, Amex cards that utilize the ‘Pay Over Time' option (balances may accrue interest charges) cannot be downgraded/swapped to regular credit cards and vice versa, nor can you swap between personal and business credit cards.
How will it affect my credit score? Downgrading a credit card can ensure the age of your account sticks, and it also keeps the credit line open without any hard pulls, both factors play a role in your credit score.
Will you lose perks or benefits that lower the value of your points/miles? Downgrading can sometimes reduce the value of the points in your account. For example, if you downgrade from the Chase Sapphire Preferred® Card to the Chase Freedom Flex℠ without having the Ink Business Preferred® Credit Card, Ink Plus® Business Credit Card, or Chase Sapphire Reserve®, you cannot transfer Ultimate Rewards to travel partners, and points are worth 1¢/point in the Chase Travel Portal.
Downgrading to a no-fee product may disqualify you from earning a new cardmember bonus. When downgrading from a premium card to a no annual fee card, you forgo any bonus you may otherwise receive if the card was considered a new product.
The Best Credit Card Downgrade Options
Downgrading American Express Cards
As of September 1, 2016, you will no longer receive a prorated fee from Amex cards when canceling outside of 30-days of the charge posting to your account. The same rule doesn’t apply to downgrading products. When upgrading or downgrading an Amex card, you still receive a prorated fee if within 30-days of the fee posting.
If you hold a regular American Express credit card and want to downgrade, the best options are The Amex EveryDay® Credit Card from American Express or the Blue Cash Everyday® Card from American Express
If you want to maintain and use a balance of Membership Rewards points, the Amex EveryDay will allow you to continue collecting and transferring Membership Rewards.
If you hold an American Express card that makes use of the ‘Pay Over Time' option, your options are a bit more limited. The Amex business card with the lowest annual fee is the Business Green Rewards Card from American Express which charges a $0 introductory annual fee for the first year, then $95 annual fee.
Downgrading Chase Cards
A lot of the cards offered by Chase are co-branded cards attached to hotel and airline loyalty programs like Southwest Rapid Rewards and IHG Rewards Club. The downside to these cards is you cannot downgrade or product change a co-branded card to one that earns Ultimate Rewards or even to a cashback card.
Although you can downgrade within a co-branded program if there is more than one card such as downgrading the United Club℠ Infinite Card to the United℠ Explorer Card. Just be aware that by downgrading, you will miss out on any signup bonus the card is running at that time.
The same goes for Chase branded cards, which can only be downgraded to another card from within the UR points earning family of cards.
If you intend to downgrade the Sapphire Preferred, an option without an annual fee is the Chase Freedom Flex℠. The card still earns Ultimate Rewards points with bonus categories that earn up to 5%, but you need to hold the Sapphire Reserve, Sapphire Preferred, Ink Plus, or the new Ink Preferred to transfer points to travel partners, or redeem points for more than a penny apiece in the Chase Travel Portal.
If you hold the Ink Plus, you can downgrade to the Ink Business Cash® Credit Card which is a fantastic small business credit card that charges $0 in annual fees.
Note: Chase no longer allows cardmembers to hold more than one Sapphire card. Downgrading from a Sapphire card to something else doesn't change your eligibility right away. We've seen reports the process can take 45 days or more.
Downgrading Citi Cards
Citi will not let you downgrade inside the initial 12 months of opening a credit card account, and they will charge at least part of the annual fee on the card if you are downgrading after the fee is applied.
There are a couple of options for downgrading Citi cards. The Citi® Double Cash Card is an easy to understand 2% cash-back card offering 1% on purchase and 1% when the statement is paid. A great card to downgrade to, as you do not miss out on any welcome bonuses.
If Citi ThankYou Points is your preferred method of earning within Citi, the Citi ThankYou® Preferred Card is a $0 annual fee card that allows you to maintain a balance earned on a Citi Premier® Card or Citi Prestige® Card, although you cannot transfer points to travel partners without one of the two premium cards.
There are many factors that need to be considered before you decide whether a card is ripe downgrading or should be canceled altogether.
We highly recommend talking to a rep to see if there are any promotions or bonuses available before heading down either path and also to explore downgrade options before making the decision to cancel a card as cancellations can sometimes have an adverse effect on your credit score.
If you have any questions, please don’t hesitate to reach out. We would love to hear from you and if there is anything we’ve missed, let us know in the comments!
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