Don’t Just Cancel Your Credit Card: Consider This First
Your annual fee just hit, but the perks no longer feel worth it. Canceling might seem like the obvious move, but don’t rush. Consider downgrading instead. A downgrade (also called a "product change") can help you avoid the fee without losing your credit history or rewards. In this article, we’ll break down canceling versus downgrading: what each means, how they impact your credit, and which option better supports your financial goals.
Canceling vs. Downgrading: The Basics
Canceling means closing the account entirely. No more annual fee, but also no more perks, credit history, or points.
Downgrading lets you switch to a different card from the same issuer, often one with no fee, without closing the account. You keep your credit history and usually your rewards.
Not all cards can be downgraded, but many can. Always ask your issuer.
Canceling a Card: Pros & Cons
| Pros | Cons |
|---|---|
| No more annual fee | Possible credit score impact (length/history/utilization) |
| Simplifies your wallet | Loss of unused rewards |
| May qualify for future bonuses | Lose card benefits and perks |
| Frees up space with card issuers | May weaken relationship with bank |
Canceling is straightforward but can hurt your credit or cause you to lose points if you're not careful. Always redeem or transfer your rewards first.
Downgrading a Card: Pros & Cons
| Pros | Cons |
|---|---|
| Keeps credit history and account age intact | No new sign-up bonus |
| Avoids future annual fees | Loss of premium perks |
| Keeps existing points/miles | Might earn points at a lower rate |
| No credit inquiry required | Limited downgrade options depending on issuer |
| Can upgrade again later | Potential (though rare) credit limit changes |
Downgrading is often the better choice if your goal is to preserve credit and rewards while cutting costs.
How Each Affects Your Credit Score
Canceling: May hurt your score due to shorter credit history or higher utilization.
Downgrading: Usually no effect on your score, your account and credit line stay active.
Canceling is riskier if the card is one of your oldest or has a high credit limit. You can also ask your bank to move the credit line to another card before canceling.
Rewards & Benefits Impact
Canceling: You may lose points unless they’re already in a loyalty account (like airline/hotel points). Most bank reward points vanish unless you have another card in the same program.
Downgrading: You usually keep your points, but you may lose premium redemption options. For example, Chase Sapphire Reserve points lose value if moved to a no-fee card.
Tip: Redeem or transfer points before making a move to avoid losing value.
Real-Life Scenarios
Premium Travel Card Not Being Used: Downgrade to a no-fee card to keep your points and history. Cancel only if chasing a new bonus later.
Outgrown Store or Airline Card: If a no-fee downgrade exists, take it. If not, cancel only after using any rewards or perks.
Oldest Card Charging a Fee: Downgrade to preserve your long credit history. Canceling could lower your score over time.
Rewards Chaser: Advanced users may cancel to reset eligibility for new sign-up bonuses. Most others should downgrade.
Final Tips Before You Decide
Evaluate Value: Are the perks worth the fee? If not, look to downgrade.
Research Options: Know what downgrade paths exist before calling.
Mind Your Timing: Avoid closing cards before applying for loans.
Preserve Old Accounts: Downgrade old/high-limit cards instead of canceling.
Redeem Points First: Don’t lose value, move or use rewards ahead of time.
Ask for Retention Offers: You might get a bonus or refund for staying.
Pay Off Balances: You still owe any balance post-cancel/downgrade.
Match Decision to Your Life: Your financial goals determine the right path.
Conclusion
Before you cancel a credit card, consider all your options. Downgrading can help you avoid fees while keeping your credit score intact and preserving your rewards. Canceling may still be the right choice in some situations, but it’s important to do it strategically. Review each card annually and choose the path that best fits your lifestyle and financial goals.
The Samurai app makes this easier by tracking all your credit card rewards in one place, helping you decide which cards are still worth it and which ones are holding you back.
