4 major considerations before upgrading your credit card
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Editor’s note: This guide has been updated with the latest information.
Getting a new credit card can be a great way to earn a large number of points or miles quickly, and it can also play an essential role in maximizing your everyday purchases. However, it may make more sense to upgrade an existing credit card in some instances rather than applying for a new one outright.
In fact, some issuers even offer bonuses to change products — but it’s critical to carefully consider both the pros and cons of going this route. Today, we’ll lay out the steps to take as you decide whether to upgrade a card or apply for a new one.
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Compare the bonus offers
The very first thing you’ll want to do is compare the bonus offers between upgrading a card versus applying for a new one. In many cases, this can be a fast process. Only a handful of credit cards offer bonuses for undergoing a product change — and virtually all of these are targeted to specific cardholders.
If you’re targeted for an upgrade offer, compare it to what you’d earn by applying for the card as a new cardholder. In most cases, it’ll be a lower offer, but it may be worth it due to the additional factors below.
Note that if you call customer service to upgrade, it’s a near certainty that you won’t enjoy any additional bonus. However, upgrading a card can still make sense, even without an offer.
Explore the benefits
Many top travel credit cards offer various benefits — from bonus categories on spending to automatic hotel elite status and various travel protections included. In some cases, shifting from a lower-tier card with fewer perks to a higher-tier one with more robust value — even without a bonus — could be worth it.
For example, let’s say you apply for the Chase Sapphire Preferred Card today, which allows you to earn a bonus of 60,000 Ultimate Rewards points after spending $4,000 on purchases in the first three months of account opening. After the first year, you start looking at upgrading to the card’s premium family member: the Chase Sapphire Reserve.
(Important note: You should never upgrade or cancel a new card until you’ve held it for at least a full year. Card issuers often view this as “gaming” and could try to claw back your welcome bonus.)
Now, this would incur an additional $455 in annual fees ($550 compared to $95 for the Sapphire Preferred). And there’s never been a public bonus offer to upgrade from the Sapphire Preferred to the Sapphire Reserve. Nevertheless, going this route could unlock a slew of additional perks:
- An extra one point for every dollar you spend on travel
- 10 points per dollar on Lyft rides and a complimentary year of Lyft Pink membership (compared to 5x points and no upgraded membership)
- 10 points per dollar on Chase Dining booked through Ultimate Rewards
- 10 points per dollar on hotel and car rental purchases through the Ultimate Rewards Travel portal
- 1.5 cents (instead of 1.25 cents) of value when you book travel through the Chase portal — a 20% jump
- Priority Pass lounge access
- A $300 yearly travel credit — which effectively lowers the difference in annual fees to just $155
Would you pay the equivalent of $155 for all of these additional perks? If so, upgrading in year two could make sense — even if there’s no bonus for doing so.
Consider your credit score
Another relevant factor in this decision is your credit score, one of the most important numbers to not only maximize your travel rewards but help with many other aspects of life — including car loans and mortgage rates. When you apply for a new credit card, it will count as a hard inquiry on your credit report. This will temporarily drop your score by several points (though these inquiries fall off after two years).
In addition, the new account will lower the average age of your accounts — since it will initially be 0 years, 0 months old. This could also harm your score.
Do note, however, that a new card does have some longer-term, positive effects on your credit report. It’s a new account to make on-time, in-full payments (the number one factor on your credit score). It also is another line of credit. As long as you don’t start spending more, your credit utilization rate will go down. These are important items to consider when applying for a new card.
On the other hand, when it comes to upgrading a card, this will generally have zero impact on your credit score. In many cases, you’ll even keep the same account number. And since the account remains active, it’ll retain all of its past glory — including its payment history and age. There’s no single “correct” decision here. It’s just critical to bear in mind how your credit score will (or will not) change given each option.
Remember application restrictions
Finally, there are several issuer-specific nuances that come into play here. We dig into these in-depth on our guide to upgrading credit cards, but it’s critical to keep these in mind. Here are a few important ones:
- Chase’s 5/24 rule: Generally speaking, you may not be approved for a new Chase card if you’ve opened five or more new cards in the last 24 months. Upgrading a card, however, shouldn’t count toward this limit.
- American Express’s one-bonus-per-card policy: Once you have held a specific American Express card, you’re generally not eligible for a welcome bonus on that card again in your lifetime. The offer terms of the American Express® Gold Card, for example, say this: “Welcome offer not available to applicants who have or have had this Card or the Premier Rewards Gold Card.” Even if you upgrade, that should count as “having” the card — making you ineligible for any future welcome bonus.
- Card family restrictions: Finally, certain related cards have their own restrictions. For example, you can only earn a bonus on any Sapphire card from Chase once every 48 months. So in the above situation, a second-year cardholder of the Sapphire Preferred can’t earn a welcome bonus on the Sapphire Reserve. They’d need to upgrade to the Reserve or sit tight with the Preferred — applying for a new card simply isn’t an option until they’ve gone 48 months from earning the initial bonus.
For more information on these items, be sure to view our complete guide to application restrictions.
There are many decisions to make in order to maximize your travel rewards strategy — like selecting a preferred airline and favorite hotel loyalty program to earn your business. However, one of the most important things to decide is the composition of your travel rewards credit cards. And part of this is whether to upgrade an existing card or apply for a new card outright.
In many cases, upgrading won’t bring you a windfall of points or miles, but it also won’t impact your credit score. And if you can fully utilize the set of perks on the upgraded card, it may very well be worth it. Be sure to consider the above items the next time you’re trying to figure out if upgrading a card in your wallet makes sense.
Additional reporting by Chris Dong.
Featured photo by Zach Griff/The Points Guy.
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