When and How To Upgrade Your Credit Card

Credit cards have come a long way since the Diner’s Club charge card in 1950. Those early credit cards were one-size-fits-all, but today there are cards to fit every lifestyle and budget. 

Some cards focus on rewards like travel and personalized services. Some offer low interest rates and low fees. Some give you cashback on your purchases. Capital One alone offers more than 30 different card programs — and that’s not including their third-party cards with airlines and hotel chains!

That means you have tons of choices for the perfect credit card for you. Maybe you’re paying high fees on your current card for just a few benefits. Or maybe your spending habits have changed. If so, it may be time to upgrade your card to one that better suits your lifestyle.

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When To Upgrade Your Credit Card

Start by looking at your next statement (or your cardholder agreement) to see what benefits your card offers versus what it costs you in annual fees and interest charges. Compare the cost against the benefits you actually use. 

For example, if you still have a student credit card but your career is taking off and you travel frequently, you may want a pricier travel rewards card with concierge features and upgraded flights. 

Or maybe you rarely travel, in which case paying high annual fees to collect airline miles and hotel points might not be as useful as a simple 2% cashback card. 

How you use your card matters, too. If you carry a sizable balance from month to month, interest charges can quickly surpass the financial benefits of your perks. 

While it’s exciting to see airline miles accumulate so you can upgrade to first class on your next flight, if you are paying 24.99% APR on several thousand dollars, that upgrade could be more expensive than just buying the seat outright. 

If you’re in significant credit card debt, a low APR is the most useful perk you can get. But if you pay your balance off in full every month like clockwork, the APR doesn’t matter as much — features like travel rewards, cashback programs, and purchase protection may be what you want. 

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How To Upgrade Your Credit Card 

If you are happy with your credit card issuer, upgrading your card might be as simple as calling the phone number on the back of the card or going online to see what other cards they offer and that you qualify for. 

If you are a customer in good standing, chances are very good that you can just call them up and switch to a different card. In the lingo of the credit card biz, it’s called a “product change.” Your credit limit, account age, and credit profile remain the same and it usually doesn’t require a hard pull on your credit. 

One downside is that a product change will not typically get you any advertised introductory rates or sign-up bonuses, since you are already a customer. 

If you are looking for introductory features like a sweet sign-on bonus or a low APR, you are most likely going to need to swap issuers. 

Unlike a product change with your current issuer, this will require a credit application with a hard pull on your credit to qualify. You can check your credit score beforehand so you know how likely you are to be approved. 

It is important to avoid a hard pull if you have an upcoming major purchase, like a mortgage or car loan, because for those you need your FICO score at its best.

READ MORE: How Do Credit Scores Work (and Why Do They Matter)?

Know What You Are Getting Into Before You Get Into It

Before you upgrade your credit card, read the fine print. 

Cardholder agreements and programs tend to be long, wordy, and confusing. Before you switch to any type of credit card program, make sure you understand how the program functions and how it can change. 

If you are looking at an introductory 0% APR, check how long that lasts and what purchases or balance transfers qualify. 

Also, be aware of when and how that introductory rate can change. While no one plans to go over the limit or make a late payment, know what those events will cost you — because, well, life just happens sometimes. 

If you’re in doubt, ask the customer service agent to clarify anything in the cardholder agreement that you don’t understand.

Be realistic with rewards

Think about what rewards you will actually use and what they cost. Credit card companies are masters of aspirational marketing and the glossy brochures of exclusive cards, concierge services, and endless travel upgrades are very appealing. 

Who doesn’t like flying first class, staying in a premium suite, or calling up someone named Miles to book travel for you? 

But make sure that benefit (which might cost you several hundred dollars per year) is more than just an ego boost and you’re actually using the perks you’re paying for. 

Nearly 70% of rewards credit cardholders haven’t used their cashback, points, or miles, reports Lending Tree. And unclaimed rewards have previously been estimated at a mind-boggling value of $100 billion to American consumers, according to Bond Brand Loyalty. 

That’s a lot of unflown air miles and unslept hotel beds that frankly could have been put to better use. 

How a New Credit Card Affects Your Credit Score

Getting a new credit card will impact your credit score, and it’s important to understand how this works.

The least impactful to your score would be a simple product change, since it usually only requires a soft credit check. 

However, if you increase your credit limit, it usually will require a hard check. But an increased limit also lowers your utilization ratio, which can increase your score slightly (assuming you don’t increase your carried balance as well).

Opening a new credit line will also require a hard check. But many issuers have a “pre-qualify” feature on their website that lets you know if you qualify without a hard check before you actually apply. 

With balance transfers, if you can get all of your cards under a 30% utilization ratio, you should see an improvement in your credit score after a few weeks. 

Once you open a new card, don’t close your old one. Account age is a key component of your FICO score. It is better to leave the oldest accounts in your file open — assuming they aren’t costing you a hefty annual fee. If you are paying a fee, downgrade your “retired” card to something basic and free.

READ MORE: What Is a Good Credit Score?

FAQs

Can you upgrade your credit card limit?

You can ask to increase the limit on your credit card without applying for a card change or upgrade. Contact your issuer through the phone number on the back of your card.

If you’ve regularly made your payments on time, have a good credit score, and have been a customer for a while, they may agree to an increase.

Does upgrading your credit card help build credit?

Upgrading your credit card probably won’t increase your credit score, unless you also increase the limit on your credit card (and keep your balance low), as this reduces your credit utilization ratio. The credit bureaus want to see a utilization ratio below 30%.

Applying for a new credit card with a new issuer will temporarily decrease your credit score since they’ll have to do a hard credit check. But if you make your payments on time, that decrease shouldn’t last too long.

What are the drawbacks of upgrading your credit card?

When you upgrade a card as an existing customer, you usually won’t qualify for any sign-up bonus or introductory APR. Your new card may also have a higher annual fee, especially if it offers better rewards like travel miles or cashback.

As well, it may be tempting to spend more once you have a premium card, since you can earn even more rewards. It’s important to keep your balance low, so that you don’t end up owing lots of money in interest.

Bottom Line

If you’ve outgrown your existing credit card, it may be time to consider one that will better suit your lifestyle and spending habits. Premium credit cards can help you score great perks like upgraded flights or earn you money back on purchases. 

But before you upgrade, make sure to read the fine print. You want to know how much your new card may cost you so you don’t waste those rewards! 

For more credit card and personal finance tips, check out these episodes of the Erika Taught Me podcast:

• Fly First Class For Free With These Travel Hacks with The Points Guy
• How To Budget for Beginners
• 10 Steps Towards Financial Wholeness

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