Applying for a new card and keeping your current one...

Applying for a new card and keeping your current one can often be more beneficial than upgrading. Credit: Getty Images/EmirMemedovski

So you've been faithfully wielding a credit card with a $0 annual fee and a modest spending limit, but it’s got a lackluster rewards program. You’re enticed by the prospect of a credit card that promises impressive benefits.

The allure of perks like concierge service, free hotel night stays and exclusive lounge access is undeniable.

In fact, cardholders who say their annual fees average $100 or more have higher satisfaction with the benefits and rewards on their cards than customers who have cards with lower or no annual fees, according to the J.D. Power 2023 U.S. Credit Card Satisfaction Study.

So it might seem wise to contact your credit card issuer and ask if your existing card can be upgraded to one with higher rewards. Upgrading — rather than applying for another credit card — might seem logical, especially because your card number will likely remain the same (so you won’t have to change it in automatic payment accounts). But that’s not always the smartest financial move.

Rather than putting all your spending into a single upgraded card, consider the strategy of holding multiple credit cards. That way, you can bring in a new premium credit card with lavish perks without surrendering the simplicity of your trusty $0 annual fee card.

Impact on credit scores

The notion of too many credit cards hurting your credit scores is generally a credit myth. Here’s why:

Having multiple credit cards isn't just about expanding your wallet — it's a strategic move that can improve your credit utilization rate.

Holding multiple cards typically means your overall amount of available credit increases, (assuming your credit limit on your existing card remains steady). And assuming your spending remains steady, too, then multiple cards lower the percentage of your available credit that you're using.

This ratio, known as credit utilization, can impact up to 30% of your credit scores depending on the scoring model being used, according to credit bureau Experian. A lower credit utilization ratio indicates responsible credit management, which in turn can boost your creditworthiness.

It also can be good to have multiple credit cards for practical reasons, such as providing a backup if your main card is lost or stolen. If you need to pause or cancel cards that were inside your wallet, that backup credit card might prove useful while you wait for replacements.

Missed opportunities 

Most people intend to upgrade their card seemingly to earn more rewards. But often the act of upgrading — rather than applying for a separate card — robs you of the opportunity to earn rewards.

Credit card companies often entice new customers with limited-time promotions like 0% APR periods, bonus points or waived annual fees.

Sometimes when you upgrade an existing card, you forfeit the chance to capitalize on those introductory offers, which can provide substantial short-term financial benefits.

Multiple cards typically mean more rewards

Just because a card has a high annual fee doesn't mean it earns better spending rewards than its low or no annual fee siblings. For example, Hilton’s top-tier card offers include Diamond elite status, resort credits and a free night certificate, but its rewards on spending outside of travel are pretty lackluster. Conversely, other Hilton credit cards don’t offer as high a value at Hilton hotels, but they do offer a high rewards rate on everyday spending categories including U.S. restaurants, supermarkets and gas stations.

In that case, you might just hold both credit cards — one for the everyday spending rewards, and one for the VIP status at Hilton properties.

When upgrading makes sense

That said, there are some situations where a credit card upgrade makes sense.

Multiple cards mean more accounts to manage, more passwords to remember and more bills to pay. If you’d rather keep it simple, then upgrading might be a better move.

Sometimes banks even promote upgrade offers similar to introductory offers. Taking advantage of such an offer can give you a windfall of points.

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