Should I Cancel or Downgrade My Credit Card?

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The one thing that people most frequently get hung up about when it comes to travel reward credit cards is the annual fee. It hard to find a travel rewards credit card that doesn’t charge $50-$450 per year for the privilege of earning points and miles. If it doesn’t, the perks and points are often less than impressive. Sure, some companies offer to wave the annual fee the first year, but after that, is it worth paying the price? Are the rewards worth the cost? We’ll help you figure out if you should cancel or downgrade your credit card.

Popular Annual Fee Travel Reward Cards

Most of the most lucrative travel rewards cards come with an annual fee. The Chase Sapphire Preferred® is $95 per year, but the fee is waived the first year. You can collect 50,000 bonus points after meeting the minimum spending requirement of $4,000 in 3 months. 

The Platinum Card from American Express comes with a very high annual fee of $550 but comes with a suite of benefits that may be beneficial to some travelers. Plus you get 60,000 points if you spend $5,000 in the first three months.

The Citi ThankYou Premier Card offers a generous 50,000-point bonus after spending $4,000 in three months. It comes with a $95 annual fee waived the first year.

Airline credit cards also offer generous sign-on bonus and fees that are typically waived the first year.

The Chase Freedom Unlimited is a no annual fee card

The Chase Freedom Unlimited is a no annual fee card

No Annual Fee Reward Cards

If you don’t want a reward card with a fee or are planning to cancel or downgrade your credit card that carries a high annual fee, there are a few cards to choose from.

The Capital One VentureOne card is one of them. The rewards aren’t as good as the Capital One Venture, but it still comes with its own set of unique benefits. It offers 1.25x points per dollar spent, plus 20,000 bonus points after you spend $3,000 in the first three months. You won’t get that bonus if you are downgrading from the Venture card, but it is available to new cardholders. For more information on theCapital One® VentureOne® Rewards Credit Card, see here.

The Discover it card doesn’t offer a sign-on bonus, but it does offer up to 5% cash back and will match your cash back total at the end of the first year.

The Chase Freedom card and Chase Freedom Unlimited card are a couple more. The Freedom offers up to 5% cashback or 5x Ultimate Freedom points per dollar on categories that change every quarter. Plus you’ll get a sign-up bonus of $150/15,000 points if you spend $500 in the first three months. The Freedom Unlimited only earns 1.5% cash back or 1.5x points per dollar, but that’s across all spending categories. Both cards do charge a foreign transaction fee.

Amex also offers a no-fee card, the Amex EveryDay® Credit Card from American Express credit card. You can earn up to 1.2 Amex Membership Rewards Point per dollar and you’ll get a 20% point bonus if you use the card for 20 transactions in a month. There’s also a 10,000-point bonus if you spend $1,000 in the first three months. Points earned can also be transferred directly to frequent traveler programs.

Whether you cancel or downgrade your credit card will affect your credit score differently

Whether you cancel or downgrade your credit card will affect your credit score differently

To Cancel or Downgrade Your Credit Card

If you are considering whether to cancel or downgrade your credit card, keep these facts in mind:

  • You may lose any unused points
  • Your credit score might suffer if you don’t have many long-standing credit cards in your name
  • You likely won’t be able to sign up for that card again for 2 years or more
  • You lose any benefits that come with the credit card

For example, in order to use some rewards points, you have to charge purchases to the credit card in order to redeem them. No credit card means no access to points. When you cancel other cards, like ones that earn Chase Ultimate Rewards, Citi ThankYou Points, and Amex Membership Rewards, you run the risk of losing access to those platforms entirely.

As for your credit score, if you have many cards that you’ve had for years, canceling one or two won’t make your score take a dive. But if you regularly open and cancel accounts after only a year, your score could take a hit.

If you signed up for a credit card because of specific benefits, like no foreign transaction fees or free checked baggage, canceling will negate those perks.

Some reward portals may no longer be available to you if you cancel

Some reward portals may no longer be available to you if you cancel

Downgrade Your Credit Cards If Possible

The best option and one that bypasses most of the above concerns is to downgrade your card to a no-fee option instead of cancel. Downgrading allows you to:

  • Hang on to your points
  • Eliminate an annual fee
  • Keep your credit score intact
  • Retain access to the valuable point and redemption systems
  • Retain some card benefits

For example, downgrading your Chase Sapphire Preferred to a Chase Freedom or Freedom Unlimited allows you to continue collecting valuable Ultimate Rewards points. Switching from the Capital One Venture to the VentureOne means no more annual fee, but you still have access to the easy-to-use purchase eraser, plus get Capital One’s 10x bonus points at Hotels.com/venture.

Some downgraded cards even come with similar benefits as their more expensive siblings, like no foreign transaction fees and trip insurance. However, more often than not, point-per-dollar values will weaken with the no-fee cards. But they will help keep your credit score strong and healthy as downgrading doesn’t show up as a cancellation.

Considerations

Do keep in mind that, typically, you won’t get whatever welcome bonus the downgraded card is offering. But it will go a long way in padding your credit score so when you apply for the next travel reward card with a tempting bonus, your credit score won’t take such a hit.

Just keep an eye out for policy changes like foreign transaction fees or foreign exchange fees so you know what to expect if you plan on using the card while traveling in other countries.

The Bottom Line on Canceling or Downgrading a Credit Card

Basically, if you’re wondering whether you should cancel or downgrade your credit card, keep these things in mind:

  • Will canceling hurt my credit score?
  • Will I lose my points and miles if I cancel?
  • Will I be able to get that credit card again if I change my mind?
  • Do I still want access to my card’s specific perks and benefits?

Generally speaking, downgrading to a no annual fee card is almost always a smarter move if you’re considering whether to cancel or downgrade your credit card. It’s a great way to keep the points adding up and keep your account history. 

Mary Renking

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Should I Cancel or Downgrade My Credit Card?
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About the Author

Mary Renking
Mary writes about how to book travel with award miles & points, reviews top travel credit cards, and basic rewards news.

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