How to Downgrade Premium Credit Cards: Prestige, Reserve, Platinum

How to Downgrade Premium Credit Cards: Prestige, Reserve, Platinum

Premium credit cards can be a great value, but they also carry a hefty annual fee. You can enjoy free airport lounges, travel credits, insurance, and other perks and privileges, but at some point, you might decide you don’t want to pay the annual fee anymore or you want to try a different card. Many of the benefits like lounge access, the Global Entry credit are offered by several cards. But if you close the card you lose the credit line attached to it and that may bring down your credit score. There are also other considerations like what to do with the points you’ve accrued. So what’s the best plan to keep your credit line and points? You downgrade the card.

Closing a Credit Card Can Be Risky

You can simply close the card, but there are two major issues with that. First, you might be forfeiting all the remaining points you still have with the card. Every issuer has a different policy, but none of them will let you keep the points when you close the card. You have to be careful and know exactly what to expect. The second major reason why you may not want to simply walk away is that it can adversely affect your credit score. Let’s start with this caveat because your credit is more important than miles or points.

What Happens to Your Credit Score When You Close the Card

Sometimes, nothing. But it depends.

There are two components of the FICO credit score that this action can affect: Utilization Rate (UR), which is a debt to credit ratio, and Average Age of Account (AAoA).

AAoA is a secondary component, and it doesn’t affect your credit score a lot, although when your credit file is thin, everything counts. But UR is a primary factor and must be taken very seriously.

Closing-a-credit-card
Before closing a credit card think about the impact

When you close a credit card, your credit line gets closed too. It’s not a problem if you have a lot of other credit lines with the same issuer and across other credit cards. If that’s not the case, however, by closing the card, you might be asking for trouble. Here are two examples.

Let’s say you have four credit cards with combined $45,000 credit lines. Let’s presume that your UR can be described as follows:

  • Card #1: Credit line $10,000, Balance $1,000
  • Card #2: Credit line $15,000, Balance $1,400
  • Card #3: Credit line $8,000, Balance $1,200
  • Card #4: Credit line $12,000, Balance $400

When you close one of these lines, it’s not going to considerably affect your credit standing. Most of these lines have a UR less than 10 percent, so even if it leads to a change in your credit score, it will be so small, you might not even notice.

Here is a different situation.

  • Card #1: Credit line $10,000, Balance $3,000
  • Card #2: Credit line $15,000, Balance $1,200
  • Card #3: Credit line $8,000, Balance $3,300
  • Card #4: Credit line $12,000, Balance $3,800

The UR across all credit card accounts is just slightly above 25 percent, which is quite decent. But here is what happens if you decide to close the second, $15,000 credit line.

  • Card #1: Credit line $10,000, Balance $3,000
  • Card #3: Credit line $8,000, Balance $3,300
  • Card #4: Credit line $12,000, Balance $3,800

In this scenario the UR jumps over 30 percent, which many credit advisers consider a border you might want not to cross if your goal is to maintain healthy credit.

By the way, even if you pay off your balances every month, credit bureaus will still show that you carry a balance. That’s because most issuers send your credit snapshots to the bureaus when the statement is cut, and not at the time of payment.

What Happens to Your Points When You Close the Card

You can always use the points before closing. With all three programs, you can either book your travel or transfer the points to the frequent flyer program of your choice. However, one of the best features of these programs is being able to transfer points where you need them when you need them. If you can’t plan your travel for many months or years ahead, you might want to keep your points until you know how you want to use them.

Closing American Express Platinum: What You Need To Know

When you close the Platinum card from American Express you are forfeiting all your Membership Rewards points unless you have another Membership Rewards credit card. It used to be that you could transfer the points into your spouse’s account, but that’s not the case anymore. Theoretically, you can downgrade your Platinum card to another American Express charge card. But it can get tricky.

There are no American Express Membership Rewards charge cards that wouldn’t carry the annual fee. You could downgrade to the Premier Rewards Gold card, but you’ll still pay the $195 annual fee, even though when you apply for the Premier Rewards Gold outright, they waive it for the first year. So downgrading wouldn’t be an ideal or cheap option.

Platinum Card® from American Express
Platinum Card® from American Express
LEARN MORE
Earn 60,000 Membership Rewards® Points after you use your new Card to make $5,000 in purchases in your first 3 months.
5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
5X Membership Rewards® points on eligible hotels booked on amextravel.com

Solution

While you can’t downgrade a charge card to a credit card, you can apply for the Amex EveryDay Credit Card before closing your Platinum card. There is no annual fee and you will get a sign-up bonus. Your points will remain intact, and the EveryDay card has a good earning program.

Closing Chase Sapphire Reserve: What You Need To Know

In terms of preserving your Ultimate Rewards points, downgrading Chase Sapphire Reserve is very straightforward. If you don’t want to pay the annual fee, you can downgrade to either the Freedom or Freedom Unlimited card. The problem is, though, while you won’t lose the points, you will lose the ability to transfer them to airline programs.

Chase Sapphire Reserve℠
Chase Sapphire Reserve℠
LEARN MORE
50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward airfare, hotels, car rentals and cruises when you redeem through Chase Ultimate Rewards®.
Each year, automatically receive up to $300 in statement credits as reimbursement for travel purchases such as airfare and hotels charged to your card.
Earn 3X Points on travel and dining at restaurants- from airfare and hotels to fine dining and cafés.

Solution

Unfortunately, there is only one way to preserve your ability to transfer Ultimate Rewards points to airlines – downgrade Chase Sapphire Reserve to Chase Sapphire Preferred. It does have an annual fee, but $95 is less than $450.

Closing Citi Prestige: What You Need To Know

Citi ThankYou Preferred is the no-annual-fee card from the ThankYou family, so you can downgrade Citi Prestige to this card and preserve your points. However, just as with Chase, the Preferred card won’t allow you to transfer points to the Citi airline partners. For that you need the Citi ThankYou Premier card with the $95 annual fee.

Citi Prestige® Card
Citi Prestige® Card
LEARN MORE
Earn 40,000 bonus points after making $4,000 in purchases within the first 3 months of account opening.
With Citi Prestige®, you'll earn 3x points on Air Travel and Hotels, 2x points on Dining at Restaurants and Entertainment and 1 ThankYou® Point per $1 spent on other purchases.
Your points are worth 33% more on flights compared to non-air travel when booked through the Citi ThankYou® Travel Center.

Keep in mind, though, that Citi ThankYou points work a bit differently than points from other programs. For one thing, Citi allows you to use the points within two months after you close the card. Another option is to transfer points to any other Citi ThankYou premium card holders, so they make the booking for you. But these points are set to expire 90 days after the transfer, so if you are not ready to travel soon, this won’t work for you.

Now that you know your downgrading options, don’t forget about another option – calling the credit card company in question and talk to a retention specialist. Depending on how you’ve used the card, they might throw a good offer your way to offset the annual fee. They might even waive the fee. You won’t know until you call and ask so try that before downgrading the card.

Best Travel Credit Cards
Best Travel Credit Cards Best Travel Credit Cards Best Travel Credit Cards Best Travel Credit Cards Best Travel Credit Cards