Credit cards with annual fees offer a wide range of rewards and cardholder benefits that make them worthwhile. However, your spending habits and needs can change over time, making these cards less of a tool to save money and more of an unnecessary expense.
If you're not taking full advantage of your annual-fee credit card, you may want to consider downgrading it to a lower or no-annual-fee card. Keep in mind, card issuers typically require you to maintain an open account for one year before you can request a downgrade.
Below, CNBC Select reviews how you can downgrade your credit card in four steps.
How to downgrade your credit card
1. Evaluate the annual fee
The first step you should take is to calculate if your card is still worth the cost. You can do this by adding up the rewards, statement credits and additional cardholder benefits you plan to take advantage of and subtracting it from the annual fee. This provides you with the net cost of holding the card and tells you if keeping the card open earns you money or costs you.
Check out CNBC Select's step-by-step guide on how to find out if your premium travel card is still worth the high annual fee.
2. Compare credit cards from the same card issuer
After you decide that your annual fee card is no longer worth the cost, you can proceed with the downgrade process. Before contacting your card issuer, check out what other cards they offer and choose one or two cards that you'd prefer to downgrade to.
Be aware that downgrade options are typically limited to cards that are within the same brand. Here are two downgrade examples:
Points-earning rewards card to another points-earning rewards card
A simple example is Chase cards that earn Ultimate Rewards® points: Chase Sapphire Reserve® (see rates and fees) ($795 annual fee), Chase Sapphire Preferred® Card (see rates and fees) ($95 annual fee), Chase Freedom Unlimited® ($0 annual fee; see rates and fees) and Chase Freedom Flex® ($0 annual fee).
You have the option to request a downgrade from the Reserve to any of the other three cards with lower or $0 annual fees.
Find the best credit card for you by reviewing offers in our credit card marketplace or get personalized offers via CardMatch™.
Co-branded card to another card backed by the same brand
If you have a co-branded card, you'll only be able to downgrade to another card backed by the same brand. For instance, Delta credit cards can only switch to other Delta cards, not to JetBlue cards.
3. Call your card issuer to request a downgrade
Once you found a card you'd like to switch to, call the number on the back of your current card and request a downgrade. Tell the representative the reasons why you don't want to pay the annual fee on your card, which may include a change in your spending habits or income that affect your ability to get full value from the card.
Explain how you'd like to downgrade to a specific card and express that you want to transfer your existing line of credit to the new card. This is a key point to mention since you probably don't want to cancel your old card, which may cause your credit score to drop. Instead, you should try to maintain the same account and credit limit with the new card.
When you request a downgrade, the rep may provide a retention offer that gives you a one-time fee waiver or the chance to earn bonus rewards to help offset the fee. You may want to consider this offer if it's enough to make the card worthwhile. Otherwise, decline it and continue with the downgrade request.
4. Wait for the changes to take effect
If your request was approved, wait until you receive your new card in the mail. This may take up to 10 business days. You should also check your online account to ensure that your old card is switched to the new card.
If your request was denied, consider asking for a retention offer or canceling your card. While closing a credit card is generally not recommended, there are some situations, such as paying a high annual fee, where it may make more sense to cancel the account.
Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.
Bottom line
If you're not taking advantage of the perks of a credit card with an annual fee, downgrading it is a possibility in many cases. To do this, you'll want to call your card issuer, explain your situation and see what options are available.
Catch up on CNBC Select's in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date
