Money at 30: The Pros and Cons of Credit Card Upgrade Offers
Having been a personal finance writer for more than five years now, it’s become common for friends of mine to ask me questions about a variety of money topics. That’s why my buddy Josh was excited to call me this afternoon and tell me about a credit card offer he’d just accepted. In his case, American Express reached out and offered him the opportunity to upgrade his Gold Card to a Platinum Card. If he did so and spent $6,000 on his new card, he’d receive 100,000 Membership Rewards points. Plus, to sweeten the deal and make up for the loss of the Gold card’s perks, he’d also earn 5x points on dining and supermarket purchases for the next six months.
Obviously this seems like a pretty good deal — which is why he took it. However, the decision to accept such an offer might not be so simple in every case or for every person. With that in mind, let’s take a look at a few pros and cons to consider before opting for a credit card upgrade offer.
The Benefits of Taking a Credit Card Upgrade
A point/cashback windfall
The most obvious perk that comes with accepting a credit card upgrade is that it could come with a boatload of points and/or cashback. For example, the 100,000 points my friend was offered made it pretty hard to say “no” — especially with the bonus 5x components. Although spending category rewards and other offers can help consumers to rack up points, the truth is that most people get the greatest benefit from welcome bonuses and the like. So, getting an injection of points like this might make a lot of sense depending on your situation.
“Test drive” a product
Something else that might make a card upgrade worth it is that it could provide an opportunity to try the benefits of a card on for size. In the case of the Amex Platinum, perhaps you’re curious about the lounge access it offers or the $200 Fine Hotels and Resorts/Hotel Collection credit. Since it can be difficult to know how much value you’d get out of these perks before applying, the upgrade may make it easier to find out. Then, if you don’t get the value you were expecting…
As I was just alluding to, something else to note about upgrade offers is you can typically downgrade again once your initial year is up. By the way, this is often true of credit cards you sign up for directly as well — but seems even more understandable when the reason you got a card in the first place was that the issuer asked you to. Of course, before accepting an offer, you will want to confirm that you can downgrade without penalty and still retain your points.
Potential Downsides to Consider
The first potential downside of credit upgrade offers is that they may have a minimum spending requirement. Similar to regular welcome bonuses, your points/cashback may be contingent on you putting a set amount of spend on your card within a certain timeframe. For example, for my friend’s bonus, he’d need to spend at least $6,000 on the card during his first six months. Because of this, you’ll need to make sure that you can meet the required spend and timeframe — and without making purchases you wouldn’t otherwise make.
Higher annual fee
Another consideration to make is that you’ll likely need to pay a higher annual fee for your upgraded card. Even if a one-year waived fee may be part of the deal, this still means you’ll need to pay the fee once your first year is up. In the case of my friend’s Platinum upgrade, he did need to pay the $695 annual fee with his first statement (although he was given a prorated refund on his Gold card’s $250 annual fee at the same time). Also, keep in mind that annual fees don’t typically count toward your initial spending bonus tally, so make sure you budget for both.
Future welcome bonuses ineligibility
This one is more specific to American Express, which has some pretty strict rules on welcome offers. Normally, Amex’s offers have a “once in a lifetime” rule — meaning that, if you get an upgrade for a card a receive a bonus, you likely won’t be able to get a welcome bonus for that card in the future. Because of this, you’ll want to ensure that the upgrade offer you’re getting is worth it and at least comparable to the current welcome bonus. Otherwise, you could be doing yourself a disservice in the long run.
Finally, speaking of the long run, sometimes a card upgrade simply won’t make sense for your lifestyle. While the Platinum card has all kinds of great travel benefits, it’s admittedly a very different product from the Gold card that emphasizes dining and grocery spending instead. Thus, for some people, the short-term gains that come with the upgrade offer might not make the card worth it overall (especially when the higher annual fee is taken into account). As I mentioned earlier, there may be an opportunity to downgrade after the first year if you do find this to be the case, but just keep in mind that you may be sacrificing some benefits in the meantime.
While credit card upgrade offers may not be quite as common as regular credit card solicitation, they do happen from time to time. When they do, it may be worth taking a closer look at what the offer is, how the card in question will benefit you, what spending you’ll need to do, and whether you can downgrade after the intro period if you want to. With these considerations, you’ll hopefully be able to assess whether these upgrade opportunities are right for you, whether you’re better off sticking with your current card, or whether it might be better to just apply for the other card separately. No matter what you decide, just be sure that it makes the most sense for your situation.
Also published on Medium.