Is now the time to downgrade your premium credit cards?

Mar 27, 2020

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To say a lot has changed in the last few weeks would be an understatement. Most of us are no longer traveling, and many household budgets have constricted quickly and dramatically. It’s a scary time in some respects, and while there are many elements of life today that none of us can control, there are things we can do while navigating otherwise uncharted territory.

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Credit cards with annual fees ranging from $95 to $550 per year can make lots of sense when you are able to fully maximize the built-in credits, use the travel benefits and enjoy the lounge access and other perks. The equation, however, has suddenly changed for renewing some premium cards. For example, it’s tough to truly max-out airline fee credits while sitting on your couch.

There’s no time like the present to do some spring cleaning of your wallet, so let’s walk through what it means to downgrade a credit card and whether that choice makes sense for your situation.

Related reading: The cards I’m using while staying at home

What is downgrading a credit card?

Many rewards credit cards are actually part of rewards card “families,” enabling you to downgrade from a higher-fee card to one with a lower or no annual fee. Let’s take Hilton as a good example.

Hilton Honors American Express Cards. (Photo courtesy of American Express)
Hilton Honors American Express Cards. (Photo courtesy of American Express)

In that rewards card family, there’s the granddaddy of them all — The Hilton Honors American Express Aspire Card, which costs $450 per year (see rates and fees) and provides high-tier perks such as Hilton Diamond elite status, $250 in Hilton resort statement credits, up to $250 in annual airline fee credits and more.

The mid-tier Hilton Honors American Express Surpass® Card costs $95 per year (see rates and fees) and confers automatic Hilton Gold status, 10 complimentary Priority Pass airport lounge visits a year and a weekend award night certificate when you spend $15,000 on eligible purchases.

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There’s also a no-annual-fee cobranded Hilton credit card, the Hilton Honors American Express Card, which has a nice, round $0 annual fee (see rates and fees). Naturally, the no-annual-fee version has fewer perks. It only has automatic Hilton Honors Silver status and earns fewer points per dollar than the higher-fee Hilton cards.

Now, let’s say that you have a $450-per-year (see rates and fees) Hilton Aspire card (which is normally one of my favorites), but now you realize that you aren’t going to get much value out of Hilton Diamond status or travel credits for a while. If your annual fee is coming due, perhaps you’d rather drop down to a Hilton card with no annual fee to keep your account and save that fee for another part of your budget. That would be an example of downgrading a credit card.

Related reading: Best cash-back credit cards

That fancy stay at the Conrad Bora Bora has to wait for now (Photo by Summer Hull/The Points Guy)
That fancy stay at the Conrad Bora Bora has to wait for now. (Photo by Summer Hull/The Points Guy)

Why you might want to downgrade your credit card

An obvious reason to downgrade or product change to a different credit card is to save money on the annual fee when it comes times to renew.

If you downgrade your card to a different product instead of just closing it, you’ll retain your same account number and account history. Via a downgrade, you can quickly reduce your annual fees without totally losing your account and its history.

This can matter for a number of reasons. First, it’s just easier in some cases to keep an account open, maintaining any auto-bill payments, etc. You may also want a good track record of maintaining accounts with the bank instead of a history of opening and closing a bunch of accounts.

Closing accounts also can have an impact on your credit score. This can happen in a couple ways. First, if you close an account and thus lose that available credit, your debt-to-credit ratio can increase. This is really only especially relevant for those who carry balances on their cards, but it can be an issue. Second, the average age of your credit accounts matters, so closing older accounts isn’t always the best move. (However, closed accounts still stay on your credit report for 10 years, so the near-term impact to closing one isn’t as clear-cut as you may think.)

A downside of downgrading a card instead of closing out the higher-annual-fee card and simply applying for a lower-fee card is that you typically won’t get the welcome bonus for the lower tier card simply by downgrading.

Related reading: How credit scores work

(Photo by Maskot/Getty Images)
(Photo by Maskot/Getty Images)

Which credit cards can be downgraded?

Due to the Credit CARD Act of 2009, you need to have had your card for a year in order to upgrade or downgrade to a higher or lower fee card. Once you are beyond that one-year mark, many cards can be downgraded to other products, although issuers typically don’t advertise the options anywhere — you have to call and ask. You can also try chatting online with the bank while logged into your account if you don’t want to call. Know that opportunities to downgrade are not always 100% consistent, and what was offered to one person isn’t always the same for another person’s account.

That said, we’ve certainly heard of people downgrading from one Hilton card to another, such as in the first example. Here are examples of other downgrades we’ve heard of and the associated annual fees:

The information for the Amex Green Card, Chase Freedom Unlimited, Citi Prestige and United Club card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Related reading: Best balance transfer cards

While downgrades can potentially happen within card families, you can’t just pick any card you want to switch to at random. For example, you likely won’t be able to downgrade from a Chase Sapphire Reserve to a United Explorer Card, even though they are both Chase-issued credit cards. Most product changes will be within the same card family.

(Photo by The Points Guy)

You may be given an incentive to keep your account as-is

When you call the number on the back of your card and explain why you are interested in exploring your account options with lower fees, you may be given incentives to keep your account as-is. You could always ask if there are any promotions available to keep your current card before committing to a change.

Related reading: My Amex Platinum retention bonus: 20,000 Membership Rewards points

This opportunity varies dramatically from account to account, but if you are ready to change your account because your current usage of the perks doesn’t warrant the annual fee, it never hurts to see if there is any wiggle room with bonus points or statement credits to keep things the same.

Related reading: Best no-annual-fee cards

Consider the points implications

If you want to downgrade a card that earns points unique to a program, such as Chase Ultimate Rewards, Amex Membership Rewards, Citi ThankYou points, etc. you need to think through the implications to your points. Note that this should not impact you in the same way if your card earns miles or points that go straight into a loyalty account, such as American Airlines AAdvantage miles, Delta SkyMiles, Hilton Honors points, etc. You don’t lose those points just because you close a credit card — just be sure to not let them expire.

If you downgrade a Chase Sapphire Reserve card to a Chase Freedom Unlimited card, you will lose the ability to transfer those points to hotel and airline partners. If you want to use the points at a fixed value for travel, their value goes from 1.5 cents each with the Sapphire Reserve to 1 cent each with the Freedom Unlimited.

You may be OK with that for now. If not, you could transfer the points out to a hotel or airline partner before the downgrade or instead downgrade to a Sapphire Preferred, which at least keeps the transfer functionality going. Or, there is a way to transfer your Ultimate Rewards points to a household member, if you’re not ready to transfer them to a specific an airline or hotel program.

While the nuances of how each program manages points with each card product will vary, don’t forget about your points when making a decision to change cards. There are still ways to strategically keep your points safe in most programs, but it may require some thought and planning.

Related reading: Guide to transferable point currencies

Bottom line

It’s hard to justify a premium travel rewards credit card while you aren’t traveling — especially if you simultaneously find yourself needing to cut back on expenses. The good news about a card downgrade is that you can potentially upgrade your card account again to a more premium product in the future. This current state of life isn’t forever, and what’s in your wallet can evolve just as life does.

For rates and fees of the Hilton Honors American Express Aspire Card, please click  here
For rates and fees of the Hilton Honors American Express Surpass Card, please click  here
For rates and fees of the Hilton Honors Card from American Express, please click  here
For rates and fees of The Platinum Card from American Express, please click  here
For rates and fees of the American Express Green Card, please click  here

Featured image by Isabelle Raphael / The Points Guy

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