When Should You Downgrade a Credit Card?

Downgrading a credit card is when you product change a card, usually with an annual fee, to a lower or no annual fee card.

One of the most frequently asked questions we receive is if you can signup for a card and cancel or downgrade the card to a no annual fee product to avoid paying the annual fee within the first year. 

Usually, people signup for a card with an annual fee, meet the welcome offer requirement and try to product change the card within a few months to avoid paying the annual fee. I strongly discourage doing this within the first year of opening the card.

The first issue is that downgrading the card within the first year is considered bad etiquette. Welcome offers exist as a promotion for you to try the credit issuer's product. They trust that you'll act in good faith and keep the card for at least one year.

The second issue is that some companies like American Express have added anti-gaming terms to their card agreements. Specifically, if you have engaged in abuse, misuse, or gaming the welcome offer, the card issuer has the right to claw the bonus back.

In addition, if you cancel or downgrade the account within the first year of opening it, they can claw back the bonus or cancel your accounts.

When your welcome offer is clawed back or if you're blacklisted from the card issuer, you would have met the minimum spend amount for nothing.  

When Should You Downgrade a Credit Card?

If you don't get positive expected value from a credit card, wait until the card is at least 12 months old before requesting a downgrade to a lower-tier or no annual fee card.  

Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airlines or hotel chain, vendors or companies, and have not been reviewed, approved, or otherwise endorsed by any of these entities. 

UGC disclosure: These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.