When You’re Managing Your Credit Cards, Keep and Cancel Are NOT Your Only Options!

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When You’re Managing Your Credit Cards, Keep and Cancel Are NOT Your Only Options!

Million Mile SecretsWhen You’re Managing Your Credit Cards, Keep and Cancel Are NOT Your Only Options!Million Mile Secrets Team

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For the miles & points enthusiast, collecting rewards is only part of the hobby.  You also must stay organized to keep track of annual fees, credit card perks, and promotions!

And once you’ve been approved for multiple credit cards, you’ll have to decide which ones to keep.  Many cards have valuable perks that make it worth paying the annual fee.  But it can also make sense to downgrade or cancel a card as well.

How you manage the cards in your wallet can have an impact on your credit score AND the bonuses you’ll qualify for in the future!  So before you decided to keep, downgrade, or cancel a card, you’ll want to be sure you know how it will affect you.

When Youre Managing Your Credit Cards Keep And Cancel Are NOT Your Only Options
Downgrading a Card Can Be a Great Way to Keep Your Credit Score Fit

Million Mile Secret Agent Ryan asked:

I have the Chase Sapphire Reserve and Chase Sapphire Preferred® Card.  I am ready to downgrade the Chase Sapphire Preferred to a Chase Freedom Unlimited.

Will I keep the same credit limit ($15,000) I have currently on my Chase Sapphire Preferred?  And will I be eligible for the 0% APR on purchases for the first 15 months* that comes with the Chase Freedom Unlimited?

Good question, Ryan!

Typically, when you downgrade a card, you will be able to keep the same credit limit.  But you won’t have access to the same introductory offers & bonuses that are available only to folks when they apply for the card.

So you won’t earn a welcome bonus.  And generally you won’t be able to take advantage of 0% APR offers.

*Then 17.24% to 25.99% variable APR applies

What You Need to Know About Downgrading Credit Cards

Deciding to keep, downgrade, or cancel a card will impact you in different ways.  So be sure you understand how each decision will affect your future.  Because you don’t want a choice you make now to limit your opportunities.

1.   Downgrading Can Help You Maintain Your Credit Score

Your credit score is based on a number of factors, including the age of your accounts and your credit utilization ratio (amounts owed).  When you downgrade a card, instead of canceling it, that account stays open.  Over time this will help to increase the age of your accounts, which is a good thing!

Another advantage to downgrading is you can keep your credit line open.  This will help your credit utilization ratio because it is calculated based on how much credit you have available and the amount of credit you are currently using.

When Youre Managing Your Credit Cards Keep And Cancel Are NOT Your Only Options
Downgrading a Card Instead of Canceling Can Help Improve Your Credit Utilization Ratio & the Age of Your Accounts

If you have 3 cards open and each card has a $15,000 limit, you have $45,000 of available credit ($15,000 credit limit X 3).  If your combined balance is $5,000, you are using ~11% of your credit ($5,000 balance / $45,000 in available credit).

But if you close one of your accounts, you’ll only have $30,000 in available credit.  This could increase your credit utilization ratio to ~17% ($5,000 balance / $30,000 in available credit), which will negatively impact your credit score.

2.   Earn Future Bonuses

Depending on the bank, downgrading a credit card might have a negative impact on your future ability to earn bonuses.

For example, AMEX won’t allow you to earn the welcome bonus on a card if have or have had the exact same card before!  So if you downgrade, you won’t be able to earn the intro bonus on the card you downgrade to.  This is true even if you cancel and apply for it in the future.

Also, Citi restricts folks to earning one bonus per “brand” of cards every 24 months.  So if you have opened or closed a Citi card in the past 24 months, you won’t qualify for the intro bonus on any card in that family!  If you downgrade a Citi card, it won’t count as an account opening or closing IF the account number stays the same.

But sometimes Citi will change your account number when you downgrade, which will reset the 24-month clock!

Banks extend you credit based on your ability to pay them back.  And once you’ve hit a certain limit (which varies based on your income, credit score, etc.) they won’t want to increase your ability to borrow from them, which means you’ll be less likely to be approved for new cards.

When Youre Managing Your Credit Cards Keep And Cancel Are NOT Your Only Options
Sometimes Calling to Cancel a Card Will Help Your Approval Chances With That Bank in the Future, but Make Sure It’s the Right Call for Your Situation

In certain situations, you may want to cancel a card to reduce your credit limit so you can be approved for another credit card.  For example, if your Chase application isn’t approved, you can call the reconsideration line.  And they may let you cancel an existing card or move credit from it to the new account, if that is the reason your application was declined.

3.   Upgrade the Card Instead!

You can sometimes upgrade to a card with better perks and typically a higher annual fee.  This has some of the same advantages for your credit score as downgrading.  And it’s not often that you’ll earn a bonus for doing this, but it’s possible.

Last year, team member Jason’s wife was targeted to earn a 100,000 Hilton points for upgrading her Hilton Honors Card from American Express to an AMEX Hilton Surpass (now the Hilton Honors Ascend Card from American Express) and meeting a minimum spending requirement.

She paid a pro-rated annual fee on the upgraded card.  And even though she had the AMEX Hilton Surpass in the past, she was able to earn the bonus because the offer was targeted!  Not every credit card can be upgraded (or downgraded).  And you could be limiting your opportunities to earn intro bonuses if you upgrade.  So make sure it’s the best deal for your situation.

Bottom Line

When it comes to managing your credit cards, keeping or canceling a card is NOT your only option.

You may want to consider downgrading a card, if you can.  Because it can help maintain the health of your credit score by increasing the age of your accounts and helping your credit utilization ratio.  But you typically will NOT be able to take advantage of a card’s introductory offers (i.e. welcome bonus, 0% APR period, etc.).

With some banks, canceling a card could allow you to earn more lucrative welcome bonuses in the future.  Or if you’re lucky, you could be targeted for an upgrade offer!  Which can be great alternative to downgrading because you might be able to earn a bonus at the same time!

Thanks for the question, Ryan!

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Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)

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I’m finding with Chase, just getting back under 5/24 (after a business card only 18 months) that instant approvals really aren’t going to happen.Having “The Talk” with the reconsideration department is the only path to final approval. I’m tempted but unwilling to voluntarily reduce existing large credit lines before applying. In reconsideration calls it helps to say that I’m not requesting any new additional credit . I’m willing to transfer some existing credit 5k or 10k to establish the new card. That existing credit is a valuable bargaining chip and I don’t want to give it up hoping for an instant approval that probably isn’t going to happen often anyway.

Million Mile Secrets

Thanks for sharing, be willing to move credit around is a good strategy for a reconsideration call.

Hi – What do you mean “Sometimes Calling to Cancel a Card Will Help Your Approval Chances With That Bank in the Future”? Do you mean if you cancel by sending a secure message, it is seen as a negative interaction?

Million Mile Secrets

Thanks for the question, Soosie! How you cancel won’t matter, whether over the phone or via secure message the banks don’t place a negative value on one method over the other.