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According to a recent GOBankingRates survey, nearly 85% of American adults have at least one credit card. This is not surprising, considering the convenience of credit cards. However, credit cards can also be expensive considering all the associated fees. Some of the best credit cards – those with premium rewards or other bonuses – come with annual fees ranging from around $95 to $500 per year.
If you’re paying an annual fee for a card you don’t use, you might be tempted to close the account to save money. However, this could temporarily hurt your credit score, especially if the account was in good standing. That’s why you should consider downgrading the card instead.
How to downgrade your credit card
When you downgrade a credit card, you’re essentially switching to a new card from the same issuer that has no annual fee or a lower fee. It could save you hundreds of dollars a year. The new card may also have a lower APR, which could reduce the amount you spend on interest charges (if you tend to carry a balance each month).
Most credit card issuers will allow you to downgrade your credit card over the phone. All you have to do is contact their customer service and let them know that you want to downgrade the card to one without as much cost. Just make sure they don’t completely close the account.
There are a few downsides to downgrading a credit card. For example, the new card may not have the same rewards system. You may also not be eligible for welcome bonuses, such as a low interest introductory APR offer. Along with that, the downgraded card might still have its own set of fees, such as balance transfer, foreign transactions, and late fees.
Still, if you don’t normally use the rewards that come with your current credit card, downgrading it could save you a lot of money. Additionally, even a downgraded card may come with some benefits, such as cashback, often between 1% and 2%.
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