Should You Upgrade Your Credit Card in 2023?

It's a move that could pay off.

The great thing about using credit cards is getting to benefit from different reward programs. And if you're ready to start racking up more credit card rewards on your purchases, then you may be thinking of applying for a new credit card.

But there's another option worth looking at: upgrading a credit card you already have instead. Here's what that entails -- and how to know if you should do so in the new year.

What does it mean to upgrade a credit card?

When you upgrade a credit card, you essentially get a credit card with superior perks and rewards from the same issuer. Generally, to upgrade your credit card, you'll need to contact your issuer and ask for that change. Your issuer will then either approve that request or deny it based on factors like whether your credit score and income have changed.

You should know that some credit cards with better perks have stricter credit score requirements. So if your credit score is only okay, you may not qualify for an upgrade. On the other hand, if your credit score improved a lot this year, then next year could be a good time to ask for a credit card upgrade. (It's also worth noting that in some cases, a credit card upgrade won't require your issuer to look at your credit.)

What are the benefits of a credit card upgrade?

The main benefit of a credit card upgrade is getting access to better benefits. Your current card, for example, might only offer you 1% back on purchases across the board. With an upgrade, you may be eligible for 2% or 3% cash back on purchases from different categories, like supermarkets or gas stations.

But one of the best reasons to upgrade a credit card is that you get to maintain your account history. The length of your credit history is an important factor that goes into calculating your credit score.

So, let's say you have a credit card you've had open for three years, and now you want to upgrade. That three-year history will be tacked onto your account history for your upgraded card, which could help give your credit score a lift.

Also, in some cases, you may not need a credit check to upgrade a credit card. This, however, will depend on the upgrade at hand, and sometimes, a credit check will be necessary.

What's the downside of upgrading a credit card?

In some cases, upgrading a credit card means taking on an annual fee, or a higher fee, for better perks. That fee might easily pay for itself, but you'll need to crunch some numbers to make sure. See if the rewards you can earn with an upgrade will be worth a higher annual fee.

Also, when you apply for a new credit card, you can often chase a sign-up bonus that puts cash in your pocket for meeting a specific spending requirement. Those bonuses usually aren't available when you're doing a credit card upgrade.

What's the right call?

If you have reason to believe you can benefit from a credit card upgrade in the new year, then it could pay to pursue one. For example, let's say you intend to do a lot of traveling and want a card that offers better cash back on things like flights, hotel stays, and restaurant meals. In that case, an upgrade could make sense for 2023.

Ultimately, you'll need to think about your current credit card usage and the perks you're getting from your card. If you think you'll use a given card a lot in the new year and know there's a better version of it out there, then it could pay to see if you qualify for an upgrade.