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Navigating the world of credit cards can be a bit of a maze, especially when it comes to understanding how your actions affect your credit score. One common question that arises is: “Will switching credit cards hurt my credit score?”
Fortunately, there’s usually no harm done to your credit score when you upgrade your credit card. This is due to the fact that upgrading usually entails a “product change” made by the same issuer, which prevents a hard inquiry from being made on your credit report. Hard inquiries can temporarily lower your score, so avoiding them is a plus.
However there are a few nuances to consider before making the switch. Let’s dive deeper into the world of credit card upgrades and explore the potential impact on your credit score.
Upgrading vs Applying for a New Card: Understanding the Difference
Upgrading your credit card effectively amounts to asking to switch to a new issuer-offered card product. This can entail switching to a credit card that offers greater rewards, greater credit limits, or other benefits. Usually, the procedure entails sending a straightforward request to your card issuer; a fresh credit application is not necessary.
On the other hand, applying for a new credit card means opening a completely new account with a different issuer. This triggers a hard inquiry on your credit report, which can temporarily lower your score. Additionally, applying for a new card can impact your credit utilization ratio, which is the amount of credit you’re using compared to your total available credit. A higher utilization ratio can also negatively affect your credit score.
The Impact of Upgrading on Your Credit Score
As mentioned earlier, upgrading your credit card usually won’t hurt your credit score. Here’s why:
- No Hard Inquiry: Upgrading typically doesn’t involve a hard inquiry, which means your credit score won’t take a hit.
- No New Account: Since you’re not opening a new account, your credit utilization ratio remains unaffected.
- Same Credit History: Your credit history with the issuer remains intact, which contributes positively to your overall credit score.
However, there are a few exceptions to this rule. If your upgrade involves a significant change in your credit limit or interest rate, it might trigger a soft inquiry. While soft inquiries don’t impact your credit score, they can be visible to lenders.
The Missed Opportunity: Farewell, Welcome Bonus
While upgrading your card won’t directly hurt your credit score, you might miss out on a valuable opportunity: earning a welcome bonus. Most credit cards offer generous welcome bonuses to new cardholders who meet specific spending requirements. By upgrading, you’re essentially forfeiting the chance to snag this bonus.
In light of your unique situation and priorities, should you upgrade or apply for a new card? Upgrading could be a wise choice if you’re content with your present issuer and only want to gain access to greater benefits or rewards. Nonetheless, it might be better to apply for a new card with a sizable welcome bonus if you want to maximize your rewards potential and don’t mind a brief decline in your credit score.
Additional Considerations: Application Restrictions and Credit Card Rules
It’s important to comprehend the credit card application guidelines and restrictions before making any decisions. There are restrictions on how frequently you can apply for new cards or upgrade current ones with certain issuers. For instance, the “5/24 rule” implemented by Chase indicates that if you have opened five or more new credit cards from any issuer in the previous 24 months, you are unlikely to be approved for a new card.
Additionally, some issuers have “card family rules” that restrict the number of cards you can hold within the same family. For instance, Chase allows you to hold only one Sapphire card at a time, either the Preferred or the Reserve. This means that if you want to upgrade to the Reserve, you’ll need to close your Preferred account first.
American Express also has a “once per lifetime” rule for some of its cards, meaning you can only earn the welcome bonus once. This rule might reset after a certain period, but the exact timeframe is not officially confirmed.
Weighing the Pros and Cons: Upgrading vs. Applying for a New Card
Upgrading your credit card:
Pros:
- No impact on credit score
- Access to better perks and rewards
- No need to apply for a new account
Cons:
- Miss out on welcome bonus
- Limited options within the same issuer
Applying for a new credit card:
Pros:
- Potential for a lucrative welcome bonus
- Wider range of options across different issuers
Cons:
- Hard inquiry on credit report
- Potential impact on credit utilization ratio
- Application restrictions and rules
Ultimately, the decision of whether to upgrade or apply for a new card depends on your individual financial goals and priorities. Consider your credit score, spending habits, and desired rewards to make an informed choice.
Remember, knowledge is power! By understanding the nuances of credit card upgrades and applications, you can navigate the world of credit cards with confidence and make the best decision for your financial future.
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- If your present credit cards aren’t working for you anymore, you might be thinking about getting a new one.
- Without affecting your credit score, upgrading your credit card can help you obtain a card that better suits your spending habits and credit profile.
- Upgrading your card, though, will probably prevent you from taking advantage of the new cardholder welcome bonus.
- Remember any limitations on applications that may prevent you from applying for a new card or from upgrading your current one.
There are many reasons to upgrade your credit card, and obtaining additional benefits isn’t the only one. For instance, upgrading your credit card is a great idea if you’ve had it since college but no longer want a student credit card because you graduated.
Alternatively, perhaps you applied for your current credit card with only fair credit, but you’ve since raised your score to the point where you can access premium credit cards with the best benefits. This is just one more excellent reason to check out other top credit card offers that will reward your excellent credit with large bonus offers, higher reward earning rates, and special features like annual travel credits and airport lounge access.
But does changing credit cards really affect your credit? Continue reading to learn the benefits and drawbacks of upgrading your credit card.
Upgrading your card shouldn’t affect your credit score
A “product change,” in which the card issuer switches your current credit line to a different card product, is usually necessary to upgrade your card. Since it doesn’t add or remove any debt, this rarely causes a hard inquiry to appear on your credit reports and has no effect on your credit utilization ratio. Therefore, changing to a better credit card won’t usually have any impact at all on your credit score.
Remember that the same policy is applicable if you ask to transfer to a different credit card from the same issuer or downgrade your current one for any reason. For example, if you have an annual credit card fee and you’re sick of paying it, you might be able to switch to a credit card from the same issuer that has no annual fee, and it won’t affect your credit score.
What CLOSING a Credit Card Did to My Credit Score…
FAQ
How can I change my credit card without affecting my credit score?
Does transferring credit cards affect your credit score?
Does replacing credit card affect credit score?
Is it OK to keep switching credit cards?
Does switching credit cards affect your credit score?
Switching credit cards might not have any effect on your credit score — or it might have a bigger effect than you realize. Here’s how a credit card switch could hurt or help your credit score: Credit limit: If you switch to a credit card with a higher credit limit, your credit score could go up. Why?
Can a new credit card affect my credit score?
If you’ve outgrown your current credit card, you could ask your card issuer to upgrade it or apply for a new one. Upgrading your credit card generally won’t hurt your credit, while a new application can cause a slight, temporary decrease in your score.
What happens if you switch a credit card issuer?
A switch between issuers is the most fraught kind of change because it involves so many moving parts. Even if your credit score doesn’t suffer long-lasting damage, you’ll probably lose access to your old account history — information about past transactions, PDFs of your monthly statements and so on.
Will upgrading my credit card hurt my credit score?
The new card is linked to the same account, and it’s the account that gets reported to the credit bureaus. Don’t worry, opting to upgrade your credit card will not hurt your credit score. Lenders love to see long-term accounts in good standing, so it’s best to avoid opening new accounts or closing old ones willy-nilly.