New credit cards, with better perks or rewards programs, come along frequently. You’d like to apply for one, but you don’t want to take the credit score hit. And you’ve already got cards you don’t use.
Like all personal finance decisions, you should do your research before jumping on a new credit card. “Look at your benefits,” says Julie Pukas, head of U.S. Bankcard and Merchant Services at TD Bank. “Then do a market review of what’s available. Have banks come out with different products that might work better for you?”
If so, instead of opening a new account, investigate the possibility of a product change, in which you swap your current card with another in your issuer’s portfolio. Here’s why and how I did it.
Why do a product change?
You might request a product change rather than applying for a new card because you want a card that better matches your lifestyle and/or spending habits, and:
- You want to keep your current card’s history on your credit report.
- You don’t want a new credit inquiry on your credit report.
I fell into the first category.
Last month, I reviewed my credit card benefits and noticed that a rewards card I’ve had since 2008 didn’t offer as much as newer cards did. My card earned 1 point per dollar spent, but the redemption options were poor. For example, you need a minimum of 2,500 points to redeem rewards, and that would earn you only $12.50 in statement credit. That’s a half-cent per point, if you’re keeping score at home.
Consequently, I hadn’t used this card much — just enough so the issuer didn’t cancel it. When an issuer cancels a card, you lose the credit history and the credit line, which can hurt your credit score, even though the card can stay on your credit report for up to 10 years.
But I decided it was time to make a change: a product change. I did my research on NerdWallet and decided I wanted the Bank of America® Cash Rewards credit card. It earns 3% on a category of your choice and 2% at grocery stores and wholesale clubs on up to $2,500 in combined category/ grocery store/ wholesale club purchases each quarter (then 1%), and 1% on all other spending. And its annual fee is $0.
How to get a product change
The process didn’t take long. I called Bank of America® customer service and told the representative which card I had and which card I wanted. At first, she told me I wouldn’t be able make the switch because the two cards are different products and have different terms and conditions.
She said that mine was an old account and my credit might have changed. “But,” I said, “you know what my credit is. I pay my balance in full and on time each month.” Then I said I really wanted to change to a cash-back card.
That must have been the tipping point: I might take my business elsewhere. She asked me to hold. Within a few minutes, she came back on the line and said I was eligible for a product change, but I’d lose my points. I didn’t mind, because they didn’t amount to even 10 bucks in cash. I confirmed that my credit history would be preserved and there wouldn’t be a hard inquiry on my credit file.
She read a verification that my old account would be closed and gave me a to-do list:
1. Destroy the old card when I get the new one.
2. Notify merchants of the new number for recurring payments. (In some cases, your card number won’t change.)
3. Delete the old card from your mobile wallet and add the new one.
When a ‘downgrade’ may make sense
Product changes don’t always have to involve “trading up.” Consider, for example, the Chase Sapphire Reserve®. In August 2016, the premium card burst onto center stage like Lady Gaga at the Super Bowl. So many people went gaga over this card, with its massive sign-up bonus and fancy perks, that Chase temporarily ran out of the metal cards.
But now the 100,000-point sign-up bonus is long gone, and some cardholders might be second-guessing the card’s $450 annual fee.
They could request a product change, downgrading to the Chase Sapphire Preferred® Card. Its perks aren’t as lavish, but it comes with an annual fee of $95. The trade-off might be worth it.
The downsides of a product change
A product change can be a good solution, but it might not be a perfect one. Beware these pitfalls:
Potential loss of accrued points: Losing the points on my previous Bank of America® card wasn’t a big deal because there weren’t enough to redeem. But if you’re considering a product change, try to use your points or miles before you make the request. Issuers might approve an apples-to-apples change, but might not let you convert points to miles or cash back, or vice versa. Ask the customer service rep about the rules.
Ineligibility for a sign-up bonus: The Bank of America® Cash Rewards credit card has a modest bonus: $150 online cash rewards bonus after you spend at least $500 on purchases in the first 90 days of account opening. I’ll miss out on that because I’m porting over an old account, rather than opening up a new one. If you do a product change, you probably won’t be eligible for a sign-up bonus, either.
Limited card options: For most issuers, you can switch only between “proprietary” cards, those issued under the bank’s name. You usually cannot swap a proprietary card for a co-branded card — those issued by the bank on behalf of, say, an airline or retailer — or between two co-branded cards.
Sometimes a card issuer will upgrade or downgrade its products without a customer’s request, offering new benefits or reducing them. “The customer should understand what kind of change is being made,” says TD Bank’s Pukas. She explained that TD Bank recently made changes to the cards they issue. “We migrated everyone to the new cards. It does not impact customer credit, and the customer can take advantage of the enhanced offering.”
Whether you want to upgrade, downgrade or just get a better rewards program without a credit hit, do your research and then call your issuer about a product change.