High interest rates and limited rewards got you down? If you aren't pleased with your current credit card, you don't have to go to the trouble of applying for a whole new account. A credit card upgrade may be all you need.

"I upgraded my Gold Delta SkyMiles® Credit Card from American Express to a Delta Reserve Credit Card," said John Ulzheimer. "I definitely get better perks."

Ulzheimer is the President of Consumer Education at SmartCredit.com and says upgrading a credit card can be a good choice so long as consumers carefully weigh the costs with the benefits.

Should you upgrade your credit card?

There are many reasons a credit card upgrade might make sense. You may want to ask for an upgrade to do the following:

  • Move from a secured to an unsecured credit card
  • Enter a better rewards program
  • Access special insurance programs and concierge services
  • Lower your interest rate
  • Increase your credit limit

However, Ulzheimer cautions consumers not to jump to a more prestigious card unless it makes sense financially.

"There is a certain degree of vanity involved in using plastic," he said. "Make sure you are not showing off at a cost to you. Be cognizant that you might be upgrading your annual fee too."

In Ulzheimer's case, his new Delta Reserve card came with a $450 annual membership fee. While that sounds like a high price to pay for the privilege of using plastic, for this frequent flier, it was money well spent. Not only does the new card offer access to Medallion Miles and flight upgrades but also provides entrance to exclusive Delta Sky Club lounges. Terms and restrictions apply.

How to request an upgrade

In some cases, such as when a student graduates from college, a credit card company may voluntarily offer an upgrade. However, in most cases, the consumer needs to initiate the process.

That process can vary depending on the credit card company. Some may have an online form that can be completed to make the request while other companies may not make upgrade options as obvious. That doesn't mean upgrades aren't available; you may just have to call and ask.

Once the upgrade request has been placed, expect to wait a few weeks for a response. Ulzheimer was surprised to find he was never notified of the approval. He found out through a notification from a credit bureau that a new account had been added to his credit report.

After approval, Ulzheimer notes there may be a lag between when the old card is closed and the new card is issued. For that reason, he recommends avoiding an upgrade during a prime shopping season, such as around the holidays, to prevent the possibility of being in a 'no man's land' without a card at a particularly inconvenient time.

Other than that possible lag, the process of upgrading should be relatively seamless.

"I kept on going without missing a beat," said Ulzheimer.

Information from the old card is transferred to the new card although a new account number is issued. The only action needed by you is to update card data with any automatic billers.

Other options to consider

Consumers should be aware recent legislation may put upgrades out of reach for new cardholders. Under the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card companies are prohibited from increasing interest rates and fees during the first year except in certain circumstances. Since some cards - particularly elite rewards cards - come with annual fees, an upgrade may not be legally possible until the account has been open at least a year.

Individuals with newer accounts and excellent credit may want to consider a balance transfer instead.

"Balance transfer offers are more aggressive than I've ever seen," said Ulzheimer.

Those with the right credit history may find they can not only receive zero interest on their transfer amount but also receive zero interest on purchases for up to 18 months. At those terms, a balance transfer offer may be a more attractive option than an upgrade.

"You have to be smart about your choice to upgrade," said Ulzheimer.

If a balance transfer ends up being the right decision, Ulzheimer adds keeping the old account open can be one way to lower your credit to debt ratio and boost your credit score.