Pros and cons of upgrading a credit card
Quick insights
- Upgrading a credit card could lead to more rewards and benefits and higher credit limits.
- If you upgrade, you might miss out on welcome bonus offers (also known as “new cardmember bonuses”) that are typically available to new cardmembers who apply for the card.
- Some credit cards issuers don’t conduct a hard credit inquiry when you upgrade to another card.
Upgrading a credit card could help you receive additional rewards and benefits, but you may want to consider some of the pros and cons before making a decision. You might be considering an upgrade to a credit card with an annual fee, and whether the fee is worth it may depend on your current financial situation, including goals and needs.
It may also be beneficial to understand the terms and conditions of the upgraded card before making a decision. Here, we'll break down some advantages and disadvantages of upgrading your credit card to help you make an informed decision.
4 Pros of upgrading your credit card
Upgrading your credit card may come with a range of benefits like earning more rewards and retaining your payment history. Here are some advantages that might be available:
1. Additional rewards
Sometimes cardmembers upgrade their credit card to get access to more rewards. Cards that charge an annual fee typically offer greater rewards earning potential, such as 5x points on travel or dining. This can be advantageous for frequent travelers or foodies who want to earn more rewards on their everyday expenses.
If you’re looking to maximize your rewards, you may want to consider whether a card aligns with your spending habits.
2. More travel perks
If you’re upgrading to certain travel rewards credit cards, you might receive travel perks like:
- Airport lounge access or travel credits: Some credit cards offer airport lounge access or travel credits, which could help you take more trips or make your travels more comfortable.
- Hotel status or loyalty program benefits: Upgrading to a co-branded hotel credit card may give you access to hotel status or loyalty program benefits, such as free nights or room upgrades.
- Concierge services for travel planning: Some credit cards offer concierge services that can help you plan and book your trips, including making travel arrangements and reservations.
Check each credit card’s terms for specific details.
3. Upgraded benefits
Cards that charge an annual fee tend to have more protection benefits. These benefits may allow you to get reimbursed for eligible expenses if things go wrong during a trip. Additionally, you might get reimbursed for certain purchases you make with your credit card in eligible circumstances. These benefits may give you peace of mind when making purchases like flights or major home appliances.
4. Potentially higher credit limit
Sometimes upgrading your credit card comes with a credit limit increase, though this isn’t guaranteed. The credit card issuer may consider factors like your credit score, payment history and income when determining the credit limit. A higher credit limit may provide more financial flexibility in case of unexpected expenses or large purchases.
Additionally, keeping your credit utilization ratio low (the total money you owe on your credit cards divided by your total credit card limit) might help you improve your credit score, and having a higher credit limit might help lower your credit utilization ratio.
4 Cons of upgrading your credit card
While upgrading your credit card can offer many benefits, there are also some potential downsides to consider:
1. Changes in terms
Upgrading to a new credit card may subject you to different interest rates or fee structures, which could affect a variety of factors (including your monthly payments or overall interest rate).
It’s generally recommended to read the fine print before upgrading, as the terms and conditions of your new card may be different from your old one.
2. No welcome bonus offer
A welcome bonus offer, also called a “new cardmember bonus,” is an introductory offer for new cardmembers. After meeting a spending threshold within a set time period, new cardmembers may be able to earn rewards (typically in the form of cash back, points or miles).
If you're upgrading a credit card, you may not be eligible for a welcome bonus, which can be a significant incentive for new cardmembers. Credit card issuers may have additional restrictions on how frequently you can receive a welcome bonus offer within a set timeframe or limit you to a single offer within a card portfolio.
3. Credit inquiry
While not all credit card issuers perform hard inquiries for upgrades, it may be helpful to check before applying. If upgrading to a new credit card does trigger a hard credit inquiry, your credit score might be affected.
4. Lost annual rewards
If you're close to your cardmember anniversary, upgrading to a new card may cause you to lose out on annual rewards, such as free hotel nights or other perks. Check with your issuer to learn how upgrading will affect your annual rewards, if you have any.
When to upgrade vs. apply for a new card
Whether you should upgrade your existing credit card or apply for a new one depends on your individual financial goals and needs. Here are some factors to consider:
- Upgrading might enable you to retain your account history and credit limit: If you've had your existing credit card for a long time and have a good payment history, upgrading your card may be a good option. You'll typically get to keep your account history and credit limit, which might help you qualify for better terms on future credit applications.
- Applying for a new card might enable you to access a new cardmember bonus: On the other hand, if you're looking for a credit card from a different issuer or want to take advantage of a new cardmember bonus, applying for a new card may be a better option. Just be aware that you'll need to meet the issuer's creditworthiness requirements and may be subject to a hard credit inquiry.
In summary
Upgrading your credit card might be a way to improve your rewards earning potential and increase your card benefits, but you may want to consider some of the pros and cons. By understanding the potential advantages and disadvantages, you can make a more informed decision that aligns with your financial goals and needs.
Whether you're a rewards maximizer or travel enthusiast, evaluating your individual circumstances and the terms of the upgraded card can help you decide whether upgrading is the right choice for you.
