When is a Credit Card Upgrade Better than a New Application

By Gavin | March 05, 2019

Today we are going to be talking about when it makes more sense to do a product change or card upgrade on your existing account rather than doing a new application for a new credit card.

Now, normally we advise people to do new applications because that means you'll get the signup bonus. If you do a product change, if you do an upgrade you normally won't get a signup bonus unless you've got some kind of targeted upgrade offer as I got with the Amex surpassed card 75,000 Hilton Points, that card is now called the Amex ascend card by the way. But that was a targeted offer and those are reasonably rare, let's look.

First of all, at what effect it can have on your credit score? Closing an account and opening a new one, let's say that you are going to close an account and it's an old account right now, that will have an adverse effect on your average age of accounts, which is one of the factors that go into working out your credit score.

Now I want to clear up a little bit of a misconception here because sometimes people say if you close an account it doesn't matter because it stays on your credit report for 10 years or whatever, that's not completely true, it related to the monthly on-time payments. If you haven't been paying on time then obviously don't be negative information on missed payments, but the monthly on-time payments will stay on your credit report for 10 years and have a positive impact.

But when working out the average age of accounts, different credit bureaus use different models, and some credit bureaus use a model which only takes into account the average age of open accounts on your credit report, some others do include closed accounts in that, but the algorithms are generally secret. It's hard to know.

When working out your FICO score they do, what's called a tri-merge from the three credit bureaus, Experian, TransUnion, and Equifax, and some may have taken into account, closed accounts and some may not, so it's still going to bring down your score if you then open a new credit card having closed an old one. You exchange an old one for a new one, that's going to shorten your average age of accounts, even more, so that's bad.

It'll add a hard pull on your account for opening the new line of credit unless you're pre-qualified for an offer. If you keep your old account open you won't get a negative impact from an account, but there will still be some negative impact through shortening your average age of accounts. Because you're opening a new one not quite as much as if you close one and open and fresh one though, and also you will get a heart pull.

For those reasons, it can be advantageous to do a product change to get a new card instead of doing a fresh application. If you're dissatisfied with something about a card that you've got, let me tell you my story with this.

I have the Capital One Platinum, I've had this for about three years, it's my second oldest card, but recently I discovered that I was just never using it. It wasn't getting positive information each month through on-time payments, I also tried to get a credit limit increase on this card, and I was not approved for that either, because there was lack of information about on-time payments. I decided it would be a good idea to do a product change on this card so that I would have a capital one card that actually earned some rewards so that I would be enticed to use the card.

Now I've got loads of credit cards that own rewards, miles, cash back, all types of things, there's literally no point in me using this Capital One Platinum Card. It's just a credit building card, so what I did was I had a look on their website and saw what I was pre-qualified for. I was pre-qualified for the Quicksilver card, the saver card, and the venture card, the saver card is that new one by the way.

From Capital One, it's for foodies, it gets 3% back on dining, and so I phoned up and I wanted the saver card, but they told me that you couldn't product change to disable card directly from the Platinum. The Platinum can only be upgraded for the Quicksilver or the venture rewards card, that's a travel rewards one.

I decided to go for the Quicksilver, I did a product change upgraded to the Quicksilver, this is the regular Quicksilver, not the Quicksilver one, that one has an annual fee, it's a pretty cool card has all the numbers on the back, it also has that contactless payment thing and it earns 1.5% cash back on all purchases. It's basically the chase freedom unlimited, of course, it doesn't have the option of transferring miles up to a sapphire card though, it's just cash back this card.

If you apply for it through a fresh application it has, I think one hundred and fifty dollars sign up bonus after spending five hundred in the first three months, that sign up bonus I didn't get it overseas, because I did the product change.

Personally, I didn't really care about that, this is what I call a Tier two card. In Tier two you only really have one hundred and fifty dollar signup bonuses, it wasn't big bucks. If it had been something like a tier three or four cards with a signup bonus five hundred or more in value you would definitely want to do a fresh application, so that you could get hold of that signup bonus.

But in my case, I didn't want to put any damage on my credit report and I certainly do not want to open any new accounts at the moment, because I'm waiting to be out of the chase 5:24 range, chase has the 5:24 roll, if you've opened five new accounts in the last 24 months you can't apply for any new chase cards. I'm trying to wait so that my last 24 months don't have new accounts, may have five new accounts being open because I want to apply for the Chase Marriott card, so that's the reason for me why I didn't want to do a fresh application.

Let's just sum up the advantages and disadvantages of doing a product change. The advantage is that you do not harm your credit score through decreasing your average age of accounts or putting a hard pull onto your credit report. Another advantage would be if you were trying to be within chases 5:24 rule you do not open up another new account onto your credit report. Big disadvantage though is that you do miss out on the signup bonus.

That's my experience and those are the reasons why I did a product change recently instead of doing a new application, I'm looking forward to using this Quicksilver card, I haven't actually used it yet, I've just been using it as a prop for this post, but I am actually going to use it every month so that I do have that positive history of on-time payments, and Capital One will probably give me a credit limit increase, which I won't use, it's just for decreasing my overall credit utilization which is already at like 2%, but whatever every little helps.