Downgrade Your Credit Card to Avoid the Annual Fee

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It’s no secret that some of the best credit card sign-up bonuses happen to be the very same credit cards that come with hefty annual fees. Hello Citi Premier and Prestige.

While this can certainly be worth the cost, there are times when it simply doesn’t make any sense to keep paying the annual fee, especially if changes are made to the card.

For example, the Barclaycard Arrival Plus World Elite MasterCard is being revamped in a way that hurts both existing and new cardholders.

Going forward, minimum travel redemptions are being quadrupled from 2,500 points to 10,000 points. In other words, you won’t be able to offset those $25 Uber charges anymore. Instead, it rises to $100.

Additionally, you only get 5% of your miles back when redeeming for travel, instead of the current 10%.

The travel category is also narrowing to disallow things like tourist attractions. Strange.

However, the 40,000-point sign-up bonus is staying intact, which means it stays a winner for new cardholders.

Free First Year, Now What?

If you happened to open a credit card such as the Barclaycard Arrival Plus that waived the annual fee for the first year but no longer want/need it after year one is up, you can simply cancel it before your anniversary hits.

Same goes for a credit card that charges the annual fee the first year – if you no longer need it for year two, cancel it before your cardmember anniversary hits to avoid the second annual fee.

This way you get two years for the price of one. But canceling a credit card does come with some ramifications, including the loss of credit history once it falls off your credit report and a smaller aggregate credit limit.

This means your credit utilization goes up and your credit score could come down.

You may also forfeit any points or cash back you earned with the card.

Hi, Can I Get a Downgrade?

Clearly none of this is ideal, so if you want to keep that line of credit, or avoid opening and closing credit card accounts, simply ask for a downgrade instead.

If you’re not well versed in credit card downgrades, they’re pretty straightforward.

You can call your credit card issuer and first ask if they’ll waive the annual fee. If they won’t budge, ask if they can downgrade your existing card to the no-fee version instead.

In the case of the Barclaycard Arrival Plus, there’s a no-fee version known as the Barclaycard Arrival World MasterCard that they offered me when I complained about the changes and asked for my annual fee waiver.

It is no longer offered to the public, but they offered it to me in a hurry. All my info is transferred to the new card for the sake of my credit score and I don’t get hit with the annual fee. I also get to keep my existing points.

This is certainly better than ditching the card altogether, at least while I assess the situation. And for those who really need the credit, it’s a quick and simple solution to avoid any unnecessary costs.

Tip: Even if there isn’t a specific no-fee version of your credit card, they should be able to move you to a different card without an annual fee. Just make sure you’re aware of all the terms and conditions before agreeing to the downgrade.

Author: Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.