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Upgrading your card to get more rewards can pay off

Be sure to first determine the impact to your credit score

By Cathleen McCarthy

Cashing In
Cashing In columnist Cathleen McCarthy
Cathleen McCarthy is a journalist whose articles on travel, commerce and consumer topics have appeared in dozens of publications. She writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com

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Question for the CreditCards.com expert Dear Cashing In,
I'm considering "upgrading" my Southwest Visa to platinum or whatever status to get more rewards. Is this considered a "new" card with the resulting damage to the credit score? -- Diane

Answer for the CreditCards.com expert Dear Diane,
Upgrading a credit card can affect your score slightly, depending on how the bank (in this case, Chase) reports the new account and whether it triggers a hard inquiry.

Even with a ding from a credit check, you're not going to do much damage to your score by upgrading, unless this card is the oldest -- or only -- card in your wallet and Chase reports the upgrade as a closed and reopened account. Credit history accounts for 15 percent of your credit score and your oldest card is the most crucial element in establishing that.

If your credit history rests on this card or if you have a big loan in the offing -- such as buying a car or refinancing your home -- and don't want to ding your score, it's a good idea to call customer service for your card. Ask how they report these upgrades and whether they will do a credit check that will result in a hard inquiry, also known as a "hard pull," on your credit report if you apply.

A hard inquiry is the footprint left by a creditor that pulls your credit report to evaluate whether to offer a loan. Each such inquiry temporarily hurts your credit score by a minor amount. Even something as minor as requesting a credit limit increase can result in a ding. I recently requested an increase on a Citi Visa and was told they do a credit check for anything above 20 percent, even though I've had the card since the Dark Ages and haven't missed a payment in 15 years. (They didn't come right out with this information about the credit check, by the way. I had to ask.)

Of course, an increase in available credit can also improve your score, and may at least partially offset points lost with a credit check. That's something else to keep in mind -- whether an upgrade significantly increases your available credit overall.

The other question is whether it's worth upgrading from your current card, Southwest Visa Plus, to the Southwest Visa Premier. I'm guessing you received an offer from Chase to double your annual reward-points bonus if you upgrade to the Visa Premier.

Both cards earn a point per dollar on purchases and two points per dollar spent on Southwest. With your current card, you pay a $69 annual fee and get 3,000 Rapid Rewards points as an annual bonus, worth about $50 toward "Wanna Get Away" fares. Upgrading to the Southwest Premier Visa would get you 6,000 annual points (worth about $100) for a $99 fee, so you actually break even in terms of travel benefits, instead of paying $19 extra as you are now.

With the Premier version, you also pay no foreign transaction fees and earn 1,500 tier-qualifying points (toward Southwest's version of elite status) for every $10,000 in purchases, up to 15,000 per year -- something you're not getting now. Overall, Premier seems well worth the $30 increase in annual fee, if Southwest is your airline of choice.

See related: 3 trends shaping today's rewards credit cards, FICO's 5 factors: The components of a FICO credit score, Your keys to getting in the 700+ credit score club

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Published: December 11, 2012


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