Pros and cons of downgrading your credit cards right now

Apr 8, 2020

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The rapid explosion of the premium credit card market is predicated on a simple belief that by paying more upfront (in the form of annual fees) you can reap large, ongoing rewards through travel credits and other luxury perks.

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Unfortunately, with travel around the world grinding to a halt due to the coronavirus, many customers are now unable to use the perks they paid so much for. Today we’re going to take a look at some of the pros and cons of downgrading your credit cards right now.

Related reading: When can you downgrade your credit card account?


For the purpose of this post I’m going to assume that your annual fee is due soon, because otherwise there’s no real benefit to downgrading now as opposed to waiting. If you annual fee is coming up, downgrading or even cancelling your card outright might be a very tempting option.

Annual fees on most premium credit cards top $500, and given the unpredictable state of our economy, keeping that money in your bank account might be smart. No one knows how long this economic slowdown will last and which companies will survive these turbulent times. Now is a time to put your financial security first and travel rewards second, and that $500 could help if you end up out of work for an extended period of time.

Related reading: Best rewards credit cards

So far, we haven’t seen any credit card issuers make sweeping policy changes such as annual fee waivers or benefit reimbursements, but there’s always a chance that by calling in and threatening to cancel or downgrade your credit card you might receive a retention offer.

These vary by issuer and also from person to person, but they generally take the form of an annual fee waiver, courtesy points or bonus points after reaching a certain spending threshold. If you receive an offer, it might be enough to offset your entire annual fee, or at least the travel-related perks you’re currently unable to use.

Related reading: Your ultimate guide to credit card retention offers


Before cancelling or downgrading a credit card, it’s important to understand how that decision fits into your long-term plan. Looking specifically at American Express credit cards, downgrading to a different product might prevent you from earning the welcome bonus on that card in the future.

(Photo by Isabelle Raphael / The Points Guy)
(Photo by Isabelle Raphael/The Points Guy)

Let’s take the hypothetical of a customer who has The Platinum Card® from American Express. The up to $200 annual airline incidental fee credit and up to $200 annual Uber credit are how most people go about recouping the card’s $550 annual fee (see rates and fees), but they’ve been rendered essentially useless for the time being (unless you use the Uber credit to order UberEats food delivery).

Related reading: 3 ways to use your Amex Platinum Uber credit while stuck at home

Since you can only product change from one charge card to another, you might consider downgrading to the American Express® Gold Card — with its $250 annual fee (see rates and fees) — which offers an up to $120 annual dining credit and 4x bonus points on restaurants worldwide and U.S. supermarkets (up to $25,000 a year; then 1x). The very first line of the terms and conditions of the Amex Gold application reads as follows:

“Welcome offer not available to applicants who have or have had this Card or the Premier Rewards Gold Card”

This means that simply by downgrading to the card now, you’d forever prevent yourself from earning a valuable welcome bonus on it.

(Photo by Isabelle Raphael/The Points Guy)
(Photo by Isabelle Raphael/The Points Guy)

Another consideration is how long you’ve had your card open. If you’ve had this card for 2+ years, downgrading should be fine, but some issuers (again, especially Amex) are sensitive to customers downgrading at or around the one-year mark. In fact, Amex includes broad language with most of its credit cards that allows it to claw back your original welcome bonus if you downgrade a card before the first year is up. Saving a few hundred dollars right now might mean forfeiting points worth twice as much.

The last reason you should think twice before downgrading your cards right now is the sheer uncertainty surrounding the feature. The coronavirus pandemic could stretch out for many months or even years to come, or, we could get it under control in time to get back to traveling by the end of the year. We simply don’t know yet, and I, for one, know that when travel picks up again I’ll want all my premium credit cards (and their perks and bonus categories) in my wallet ready to go.

Bottom line

You should never do anything in the pursuit of travel rewards that jeopardizes your personal finances, and that includes paying hefty annual fees on premium credit cards with perks you aren’t able to use right now. Still, we’re very early into this crisis, and if it’s possible for you to wait a few weeks or months before making a decision, that would be the recommended course of action.

Featured image by Isabelle Raphael/The Points Guy.

For rates and fees of the Amex Platinum Card, click here.
For rates and fees of the Amex Gold Card, click here.

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Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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