Downgrade to No-Fee Airline Cards Could Save Money — and Your Score
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All of the biggest U.S. airlines offer credit cards with either no annual fee or a lower fee than their standard cards. These cards aren’t exceptional offerings, especially for frequent travelers. But they could provide value in a different way for existing airline cardholders thinking about canceling their high-fee cards. By downgrading to one of these cards, they could dump their current airline card, and its annual fee, without hurting their credit scores.
For example, if you used to live in Atlanta, a Delta Air Lines hub, but moved away and now rarely use your Delta SkyMiles® Gold American Express Card, you might find it’s not worth its annual fee: $0 intro for the first year, then $150 (see rates and fees). But you might be able to get rid of the recurring fee by requesting a downgrade to the Delta SkyMiles® Blue American Express Card, which has an annual fee of $0 (see rates and fees). Without a fee, it doesn't cost you anything to keep a seldom-used card.
Downgrading vs. canceling
Downgrades are a little-known way of ditching a card without closing the account. Canceling a card account can hurt your credit in a couple of ways. First, it reduces the average age of your open accounts. More significantly, it reduces the amount of your available credit, which can increase your credit utilization, a big factor in credit scores. Swapping a card for a different one within the same family — even from a fee card to a no-fee card — doesn’t hurt if you can retain your account and credit limit.
The downgrade option is not one that issuers advertise, and it isn't guaranteed. It might involve negotiating with a customer service representative. The backdrop for the conversation is that the issuer wants to keep you as a customer and would likely rather have you downgrade than cancel. Be aware that you won't get any sign-up bonus for downgrading to the new card.
All three major network airlines have paid attention to the market for cards with no annual fee. The other major U.S. carrier, Southwest Airlines, doesn't have a no-fee card, but it does have a cheaper alternative:
Airline | Standard card, annual fee | Lower-cost card, annual fee |
|---|---|---|
American | Citi® / AAdvantage® Platinum Select® World Elite Mastercard®, $0 intro for the first year, then $99 | American Airlines AAdvantage® MileUp®, $0 |
Delta | Delta SkyMiles® Gold American Express Card, $0 intro for the first year, then $150 | Delta SkyMiles® Blue American Express Card, $0 |
Southwest | Southwest Rapid Rewards® Premier Credit Card, $99 | Southwest Rapid Rewards® Plus Credit Card, $69 |
United | United℠ Explorer Card, $0 intro for the first year, then $95 | United Gateway℠ Card, $0 |
Consider bags before bailing
Before dumping or downgrading an airline card, however, make sure it doesn’t hold enough value to be worth the annual fee. The most obvious way many airline cards earn their keep is by waiving checked bag fees, typically $25 to $35 per bag each way. That can be worth $100 to $140 on a single round trip for a couple. The no-fee versions of major airline cards do not include free checked bags. (It's not an issue for Southwest Airlines because all passengers get the first two checked bags for free.)
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