Editor’s note: This is a recurring post, regularly updated with new information and offers.
Getting a new credit card can be a great way to earn a large number of points or miles quickly and maximize your everyday purchases. However, in some instances, it may make more sense to upgrade an existing credit card rather than apply for a new one outright.
In fact, some issuers even offer bonuses to change products — but it’s critical to carefully consider both the pros and cons of going this route. I’ll outline the steps to take as you decide whether to upgrade a card or apply for a new one.
Compare the bonus offers
The very first thing you’ll want to do is compare the bonus offers between upgrading a card versus applying for a new one. In many cases, this can be a fast process.
Only a handful of credit cards offer bonuses for undergoing a product change — and virtually all of these are targeted at specific cardholders.
If you’re targeted for an upgrade offer, compare it to what you’d earn by applying for the card as a new cardholder. In most cases, it’ll be a lower offer, but it may be worth it due to the additional factors below.
Note that if you call customer service to upgrade, it’s a near certainty that you won’t enjoy any additional bonus. However, upgrading a card can still make sense, even without an offer.
Explore the benefits
Many top travel credit cards offer various benefits — from bonus categories on spending to automatic hotel elite status and various travel protections. In some cases, shifting from a lower-tier card with fewer perks to a higher-tier one with more robust value — even without a bonus — could be worth it.
For example, let’s say you apply for the Chase Sapphire Preferred® Card. After the first year, you start looking at upgrading to the card’s premium family member: the Chase Sapphire Reserve®.
(Important note: You should never upgrade or cancel a new card until you’ve held it for at least a full year. Card issuers often view this as “gaming” and could try to claw back your welcome bonus.)
Upgrading would incur an additional $455 in annual fees ($550 for the Sapphire Reserve compared to $95 for the Sapphire Preferred). And there’s never been a public bonus offer to upgrade from the Sapphire Preferred to the Sapphire Reserve.
Nevertheless, going this route could unlock a slew of additional perks, including:
- 10 points per dollar on hotel and car rental purchases through Chase Travel℠ (double the rate of the Preferred)
- 10 points per dollar on Chase Dining℠ booked through Ultimate Rewards
- 1.5 cents (instead of 1.25 cents) per point of value when you book travel through Chase Travel
- Priority Pass lounge access
- A $300 yearly travel credit — which effectively lowers the difference in annual fees to just $155
Would you pay the equivalent of $155 for all of these additional perks? If so, upgrading in year two could make sense — even if there’s no bonus for doing so.
Consider your credit score
Another factor in this decision is your credit score, one of the most important numbers to maximize your travel rewards and help with many other aspects of life — including car loans and mortgage rates. Applying for a new credit card will count as a hard inquiry on your credit report.
This will temporarily drop your score by several points (though these inquiries fall off after two years).
In addition, the new account will lower the average age of your accounts — since it will initially be 0 years and 0 months old. This could also harm your score.
However, a new card does have some longer-term, positive effects on your credit report. It’s a new account to make on-time, in-full payments (the number one factor of your credit score) on. It also is another line of credit. Your credit utilization rate will go down as long as you don’t start spending more.
These are important factors to consider when applying for a new card.
Upgrading a card, on the other hand, will generally have zero impact on your credit score. In many cases, you’ll even keep the same account number. And since the account remains active, it’ll retain all of its past glory — including its payment history and age.
There’s no single “correct” decision here. It’s just critical to bear in mind how your credit score will (or will not) change given each option.
Related: TPG’s 10 commandments of credit cards
Remember application restrictions
Finally, several issuer-specific nuances come into play here. We dig into these in-depth in our guide to upgrading credit cards. Here are a few important ones:
- Chase’s 5/24 rule: Generally speaking, you may not be approved for a new Chase card if you’ve opened five or more new cards in the last 24 months. Upgrading a card, however, shouldn’t count toward this limit.
- American Express’s one-bonus-per-card policy: Once you have held a specific American Express card, you’re generally not eligible for a welcome offer on that card again in your lifetime. The offer terms of the American Express® Gold Card, for example, say this: “You may not be eligible to receive a welcome offer if you have or have had this Card, the Premier Rewards Gold Card… or previous versions of these Cards.” Even if you upgrade, that should count as “having” the card — making you ineligible for any future welcome offer.
- Card family restrictions: Finally, certain related cards have their own restrictions. For example, you can only earn a bonus on any Sapphire card from Chase once every 48 months. So, in the above situation, a second-year cardholder of the Sapphire Preferred can’t earn a welcome offer on the Sapphire Reserve. You’d need to upgrade to the Reserve or sit tight with the Preferred — applying for a new card simply isn’t an option until you’ve gone 48 months from earning the initial bonus.
For more information on these items, view our complete guide to application restrictions.
Bottom line
There are many decisions to make to maximize your travel rewards strategy — like selecting a preferred airline and favorite hotel loyalty program to earn your business. One of these decisions is whether to upgrade an existing card or apply for a new card outright.
In many cases, upgrading will not bring you a windfall of points or miles or impact your credit score. However, if you can fully utilize the upgraded card’s perks, it may very well be worth it.
Related: Considering canceling your credit card? Here’s why you might want to “downgrade” it instead