Quick notes:

  • You can product-change to a card with more benefits, or do the reverse if you’re not taking advantage of the benefits — banks are generally happy to do either for you.
  • Banks or issuers may offer an upgrade bonus to cardholders.
  • Product changes are preferable to account closures, which can be harmful to your credit score.

 

Over the last several years, banks and issuers have rolled out their version of a high-end credit card. These cards try to justify hefty annual fees — typically north of $400 — by offering amenities that promise a luxurious traveling experience that is usually available only to the wealthy and the most frequent of frequent flyers.

Some cardholders, however, discover that a card’s perks don’t actually line up with their lifestyle. Someone might get a new job and have less time for vacations. Or, they could discover that the complimentary access to airport lounges isn’t something they actually value. Anyone in this type of situation should consider a product change.

“Product changes are an underused but widely available tactic,” says Ted Rossman, industry analyst and spokesperson for CreditCards.com. “There can be some major benefits, especially when you’re switching from a card with an annual fee to a card with no annual fee. It’s a way to get into a card that’s a better match for your lifestyle.”

Virtually every credit card issuer has some sort of policy that allows for product changes. There are, however, a few particularly exciting opportunities available for those who are willing to research and plan.

Product changes work in both directions

While product changes are the best way to get rid of an annual fee, they also offer lucrative pathways to maximize rewards earning. Popular rewards programs and co-branded cards alike virtually all feature a free or low-cost version as well as a premium version of their card.

Chase’s Ultimate Rewards offers a stark example. Their popular $450-per-year Sapphire Reserve card comes with a host of benefits, like a flexible $300 travel credit, a Priority Pass membership, and more. The Sapphire Preferred, meanwhile, lacks most of these amenities but retains access to Chase’s transfer partners — including United and Southwest — and only costs $95 annually.

Rossman says, “It’s all about what matches your particular lifestyle. With annual-fee cards, especially, you’re starting to get into the realm of intangible perks. Like, how much is airport lounge access worth to you? How much is TSA PreCheck worth to you? If you travel once a year, then it might not matter that much.”

If someone holding the Reserve feels like they aren’t maximizing the amenities, Chase will typically be happy to product-change them into the Preferred. The issuer is happy to work in the reverse, if, for instance, someone holding the Reserve wanted the benefits of the Preferred.

This doesn’t result in a hard pull on your credit. Your account stays the same, usually including your credit limit. You can even continue using your old card until the new one arrives.

Utilizing product changes is a great strategy for people without pristine credit to work their way into the premier card of their dreams. Say, for instance, you wanted the American Express Platinum to take advantage of its 5x points on flight purchases, but your credit was in the 600s. You might not qualify for the Platinum, but you might qualify for their one-step-down Gold card. After some time (usually a year, according to Rossman), you can call up Amex or look at your account and see if you qualify for an upgrade.

Welcome bonuses are a complication

While there are numerous benefits, product changes are not perfect for every situation or personal finance goal. This is especially true with welcome bonuses.

Many of the credit cards that consumers might want product-changed, as with the Chase and Amex cards previously mentioned, come with hefty welcome bonuses. For example, the Sapphire Preferred currently offers 60,000 membership rewards points for $4,000 of spending in the first three months. The Reserve, meanwhile, is offering only 50,000 on the same terms.

Product changes, however, do not automatically come with these lofty bonuses. The only way to guarantee a welcome bonus is to apply for a new account. However, this can be circumvented by waiting for the right targeted offer.

“I actually took advantage of this a few months back,” Rossman says. “I had an American Express Blue Cash Everyday card for several years. It had no annual fee and gave me 3% back at the grocery store. Then I got an email saying that I could upgrade to the Blue Cash Preferred. That has an annual fee, but offers 6% cash back at the grocery store on up to $6,000 of spending.”

With a 4-year-old at home, that sort of spend requirement at the grocers would be easy. Amex sweetened the deal for Rossman by further offering a $250 upgrade bonus.

He says, “At that point, it was a no-brainer. I’d get more value from my ongoing spending, plus the bonus was going to cancel out the next two-and-a-half years of the annual fee.”

A better alternative to canceling

While product changes can require a bit of research and patience, they are infinitely preferable to closing an account. Rossman describes disturbing statistics that the team at CreditCards.com recently found while researching what the public knows about account closures.

“We found that 129 million Americans don’t realize how harmful closing a credit card can be to your credit score,” he says.

Moreover, 15% think that closing an account has no effect on a credit score while 13% believe that closing an account will help.

Rossman says, “There’s a lot of lack of awareness here. One of the easiest ways to improve your score is to improve your credit utilization — how much you’re using divided by the total amount of your credit limits. That’s why keeping old accounts open is valuable. Assuming you’re not using a lot of your limit, having a lot of credit available and not using it is great. As long as you have an account open and it doesn’t have an annual fee, let it ride. Keep it open. It’ll help your credit.”

Issuers want to create a relationship

Closed accounts on premium cards can also lead issuers to suspect that you’re engaging in card churning. Card churning occurs when a consumer meets the minimum spend on a new card for the welcome bonus only to never use the card again.

“That’s not profitable for the issuer,” says Rossman.

The huge bonus is meant to attract consumers who will have a long-lasting relationship with the issuer. An active relationship means the bank can offer consumers loans, mortgages, or other products.

Banks have wide latitude for reeling in limits or closing accounts. These and other methods are available if they suspect a consumer is gaming the system just for a lucrative bonus.

“The industry is shifting, generally, to an ongoing value scheme,” Rossman says. “We’re seeing a lot of cards offering solid rewards for restaurants and travel and streaming services. Things that people buy all the time. It’s a way that issuers are trying to be stickier and get consumers to use a card regularly.”

Consumers should take a broad view of their personal finances before making any change. Product changes may be a way to lower your overall yearly spending. However, they may limit options for those looking to accrue valuable rewards points for award tickets and hotel stays. The key to determining the right move typically involves balancing your financial means against your travel and savings goals.

A deeper dive — Related reading on the 101:

From the Chase Sapphire Preferred card to the Bank of America Premium Rewards card, find the optimal travel credit card for you.

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