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Credit cards can come in handy in the event that you need to cover an unexpected purchase or want to offset your expenses by earning rewards through your usual spending categories.
The key to using them efficiently: Make sure that the cards you carry meet your needs and reward your spending. If you’ve been carrying around the same credit card from the very start of your credit journey, it could be time for an upgrade.
What is a credit card upgrade?
A credit card upgrade is when you swap your current credit card, perhaps a starter card or student card, for a rewards credit card with a higher limit and additional perks. The idea is to basically change to a better credit card without having to formally apply for a brand new line of credit, which would add a hard inquiry to your credit file.
This is not to be confused with upgrading to a brand new card from a different issuer.
To qualify for an upgrade, you’d typically need to have a positive payment history and be in good standing with your credit card issuer.
How to upgrade your credit card
Upgrading your card is generally a straightforward process and will simply involve giving your credit card issuer a call. In some cases, they may notify you via email if you’re eligible for any upgrades.
“Typically, you must have had your credit card for a specific amount of time before you are eligible to upgrade,” says Kendall Meade, certified financial planner at SoFi, a personal finance company. “The best way to see if you are eligible for an upgrade is to call the credit card company and ask. For an upgrade, the cardholder usually calls the credit card company to find out if and what upgrades are available to them, they then agree to the new card terms and conditions and have the card mailed to them.”
How to determine if an upgrade makes sense for you
If you’re eligible for an upgrade through your credit card issuer, there are a few reasons it could make sense to take advantage of the offer.
You’re being offered a limit increase
If you’re upgrading for a starter card that you got as a student or at the start of your income-earning years, you may still have a lower credit limit. Taking advantage of an upgrade offer could mean a credit limit increase in some cases and more spending power for you. What’s more, access to a higher credit limit will reduce the percentage of your credit that you’re already using, therefore lowering your credit utilization ratio.
The newer cards offer more lucrative rewards
Say your first credit card was a student card and you’re trading it in for one with a more expansive rewards structure like a Citi Rewards+® Card or a Chase Sapphire Preferred® Card, for example. Or perhaps your spending habits have changed. Say you’re a frequent traveler and you used your Citi® / AAdvantage® Executive World Elite Mastercard® or American Airlines AAdvantage MileUp℠ Card to earn miles to help cover your travel costs. If all of a sudden, something like a pandemic puts a wrench in your travel plans, swapping that card for something you’ll use more frequently like a cashback card could make sense.
“The types of rewards you may see on a card can include travel rewards, flat cash back, or even rotating categories. Depending on how you spend your money and what you redeem it for, different cards work best for different people,” says Meade. For some, a travel card will give them the most bang for their buck, while for others a flat cash back card would be more beneficial. It is important to sit down and look at your current spending habits and lifestyle to see what type of card will work best for you.”
An upgrade may not be the best move if:
A credit limit increase could tempt you to overspend. A higher limit can give you some more breathing room, but if you don’t have a good handle on your budget, it could open the door for frivolous or unnecessary spending.
Your motivation to change cards has to do with a sign-up bonus. Credit card upgrades don’t count as a new line of credit, therefore they typically do not come with a sign-up or introductory bonus. If you’re on the hunt for a generous incentive upfront, you might consider getting a new credit card altogether.
The takeaway
Your credit journey is ever-evolving and the “right” card will ultimately depend on what your financial situation looks like in the present moment, what you’re spending on, and what kinds of credit card features are important to you. When determining if an upgrade is the right move, consider the options being presented to you, potential limit increases and fees, and then decide if you should stay put or give your card issuer the green light.
