Skip to Main Content

Should you downgrade your credit card?

Bankrate Logo

Why you can trust Bankrate

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for . The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

If you chose a credit card for its enticing perks but are no longer reaping benefits that make the card worth its annual fee, you may want to cancel your credit card. In some cases, if you have multiple cards with high annual fees, you could be spending hundreds of dollars a year just for your credit cards. In times of economic uncertainty, this may no longer be a reasonable expense in your monthly budget.

Before canceling your credit card altogether, however, consider downgrading instead.

Benefits of downgrading instead of canceling your credit card

The main reason why you should downgrade instead of closing it altogether is your credit score. When you cancel your credit card a few things happen:

For one, your credit utilization ratio can increase, which can negatively affect your credit score. Your credit utilization ratio accounts for up to 30 percent of your total credit score and refers to the amount of available credit you are using. This number is aggregated from all lines of credit open in your name. Because of this, if you cancel a credit card, your total credit limit across all cards goes down.

Think of it this way: Let’s say you have three credit cards (card A, B and C) with three different balances.

Credit Limit Credit Card Balance
Card A $3,000 $500
Card B $5,000 $1,500
Card C $12,000 $4,000

In this scenario, your credit utilization ratio would be 30 percent because of your total available credit ($20,000) you are using $6,000.

Now, let’s say you cancel credit card B because it has a high annual fee, but keep your other remaining cards open and spend as normal.

Credit Limit Credit Card Balance
Card A $3,000 $1,000
Card C $12,000 $4,500

By just spending an additional $1,000 in a month across two cards instead of three, your credit utilization ratio would increase to 36.67 percent.

Want to quickly calculate your current ratio? Check out Bankrate’s credit utilization ratio calculator.

When deciding whether to downgrade or cancel a credit card, also consider how long the account in question has been open. When you cancel a credit card, it can decrease your average account age, which also factors into your credit score. Creditors look at your credit card account history, and it makes up roughly 15 percent of your credit score. If you cancel an  older credit card, your average account age decreases and negatively impacts your credit score.

The intricacies that come with canceling a credit card don’t have to cause you stress. If a card’s annual fee is too high, or the rewards just aren’t cutting it, downgrading your card is a way to escape the fees without hurting your credit score in the process.

How to downgrade your credit card

It’s important to note you have to request a downgrade and have it approved by a credit card issuer. In essence, immediate approval for a downgrade is not always a guarantee. To optimize your chances of having your downgrade request approved, know how long you have had the account in question open.

Some issuers don’t approve downgrade requests on accounts that have been open less than a year. That being said, we’re living in a uniquely challenging time, and if you’re unable to pay a high annual fee associated with your credit card, now is the time to reach out to your issuer to see if they can work with you.

Once you have made the decision to downgrade your credit card, it’s important that you redeem any current rewards you may have earned. One potential downside of downgrading your credit card is that you can lose rewards you didn’t redeem in the process.

When you’ve taken care of your rewards and decided you’re ready to downgrade, the next step is to reach out to your issuer to formally make the request. The process of getting your downgrade approved depends on the issuer, and some may require you call them while others will let you make the request online.

There are also limitations placed on what card you can downgrade to. In most cases, you can only downgrade to a card in the same product line. For example, if you have a Capital One Savor Rewards Credit Card and you want to downgrade, you would have to do so within the Savor product line. In this case, the card you could ask to downgrade to would be the Capital One SavorOne Rewards Credit Card.

Our Take

When it comes to credit cards, life changes may make a once useful financial tool a burden if high annual fees are tacked on. If this applies to you, take comfort in knowing there are options available that don’t have to hurt your credit score. Now is the time to reach out to your credit card issuer to explain your financial situation and ask for assistance, including options to downgrade your card.

The information about the Capital One Savor Cash Rewards Credit Card has been collected independently by The card details have not been reviewed or approved by the card issuer.

Written by
Meredith Hoffman
Credit Cards Reporter
Meredith Hoffman is a personal finance writer covering credit card news and advice at Bankrate. She is originally from Columbia, S.C., and received her bachelor's degree from the Univ. of North Carolina at Wilmington. Before joining Bankrate in October 2019, Meredith worked as the news editor of Wilmington’s local newspaper, The Seahawk.