What's the Difference Between Cancelling and Downgrading?
Cancelling and downgrading represent two distinct approaches to handling an unwanted credit card, each with unique implications for your financial health. Cancelling permanently closes your account, potentially affecting your credit utilization ratio and history length—two critical components of your credit score. This option makes sense when you want to eliminate an annual fee or reduce the number of credit products in your portfolio.
Downgrading, alternatively, involves switching from a premium card to a less expensive or no-fee version within the same card family while maintaining your account. This strategy preserves your credit line and account history, potentially safeguarding your credit score while eliminating or reducing annual fee costs.
Your decision should balance immediate financial relief against long-term credit health considerations, especially if you've maintained the account for several years.
How Cancellation Affects Your Credit Profile
Credit utilization plays a crucial role in your overall credit score calculation, accounting for approximately 30% of your FICO score. Cancelling a credit card reduces your total available credit, which can increase your utilization ratio if your spending remains constant. For example, if you have two cards with a combined $10,000 limit and cancel one with a $5,000 limit, your utilization could double overnight.
The age of your accounts significantly impacts your credit history length, another key factor in credit scoring models. Closing an older BMO card might shorten your average credit age, potentially lowering your score. Many financial experts recommend keeping your oldest accounts open whenever possible to maintain a robust credit history.
New applications following cancellation can trigger hard inquiries on your credit report. Multiple inquiries within a short timeframe may temporarily decrease your score by several points. Downgrading typically avoids this issue since it doesn't require a new application or credit check.
Benefits of Keeping Your Account Active
Maintaining an active credit relationship with BMO through downgrading offers several advantages beyond credit score preservation. Account longevity demonstrates financial stability to future lenders, potentially improving your approval odds for loans and credit products. Many consumers underestimate the value of established banking relationships when applying for mortgages or auto loans.
Downgrading preserves your reward points and program eligibility, preventing the forfeiture that often accompanies cancellation. Your accumulated points remain accessible, allowing continued redemption according to the new card's terms. This benefit proves particularly valuable if you've spent years building a substantial rewards balance.
BMO often provides relationship bonuses for customers who maintain multiple products. These may include preferred interest rates, fee waivers, or enhanced customer service. Downgrading helps preserve these valuable relationship benefits while eliminating unnecessary fees.
How to Evaluate Your Current Card's Value
Before making any decisions, conduct a thorough assessment of your current BMO credit card to determine whether its benefits justify its costs. Annual fees should deliver tangible value through rewards, perks, or conveniences that exceed their expense. Calculate your card's annual return by estimating the dollar value of rewards earned minus any fees paid.
The rewards structure should align with your current spending patterns, not past habits. Many cardholders continue paying premium fees for travel rewards despite rarely traveling anymore. Examine your recent statements to identify your most frequent spending categories and determine whether your card optimizes these transactions.
Premium benefits like travel insurance, purchase protection, and concierge services add significant value—but only if you actually use them. Track your benefit utilization over several months to determine which features you regularly access and which remain unused.
Signs Your Card No Longer Serves You
Several indicators suggest your current BMO card may no longer provide optimal value:
- Unused benefits: Premium features you rarely or never access despite paying for them through annual fees
- Changing lifestyle: Major life changes like reduced travel, relocation, or retirement that alter your spending patterns
- Better alternatives: Competing cards offering superior rewards for your current spending categories
- Fee increases: Annual fee hikes that outpace the value of benefits received
These warning signs don't necessarily demand immediate cancellation. Downgrading might resolve these issues while preserving your account history and banking relationship.
Calculating Your Annual Fee Value Proposition
Determining whether your annual fee delivers sufficient value requires honest assessment of your card usage. Track your rewards earnings over the past year and convert them to a dollar value based on redemption rates. For BMO cards, points typically range from 0.5 to 1.5 cents in value depending on redemption method.
Add the approximate value of any benefits you've actually used, such as travel insurance that replaced policies you would otherwise purchase separately. Subtract your annual fee from this total to calculate your net card value. Negative results strongly suggest considering a downgrade or cancellation.
Remember that some benefits provide intangible value beyond direct financial returns. Emergency assistance services, extended warranties, and purchase protection offer peace of mind that's difficult to quantify but still valuable.
What Happens When You Cancel Your BMO Card?
Cancelling your BMO credit card initiates a permanent account closure process that requires careful preparation. The bank will verify your identity, confirm zero balance, and process your request within several business days. Your account status will change to "closed" on credit reports within 30-45 days, though the account history remains visible for up to ten years.
Credit bureaus factor closed accounts into your credit history length calculations differently. FICO scores continue including closed accounts in average age calculations for ten years, while VantageScore removes them immediately. This difference explains why some consumers experience more significant score impacts than others following cancellation.
Reward points typically expire immediately upon cancellation unless transferred to another eligible program. BMO generally doesn't allow point transfers between different card products after cancellation, making redemption before closure essential to avoid forfeiture.
Step-by-Step Cancellation Process
Follow these steps for a smooth cancellation experience:
- Pay your balance completely: Eliminate any outstanding charges before requesting cancellation to avoid continued interest accrual
- Redeem or transfer rewards: Use all accumulated points before cancellation to prevent forfeiture
- Update automatic payments: Redirect any recurring charges to another payment method
- Contact BMO directly: Call the customer service number on your card or use secure messaging through online banking
- Request written confirmation: Obtain documentation confirming account closure for your records
After cancellation, monitor your credit reports to verify proper account closure reporting. Occasional errors occur where closed accounts appear as active, potentially causing confusion with future lenders.
Potential Drawbacks to Consider
Cancellation carries several potential disadvantages that merit consideration:
- Credit score impact: Possible reduction in score due to increased utilization and shortened history
- Lost relationship benefits: Forfeiture of any BMO relationship bonuses tied to card membership
- Reward program exclusion: Potential ineligibility for future signup bonuses if BMO implements restrictions for previous cardholders
- Emergency access reduction: Decreased available credit for unexpected expenses or emergencies
These drawbacks don't necessarily outweigh the benefits of cancellation, particularly if you're paying high fees for unused features. However, they highlight why downgrading often presents a more balanced approach for many cardholders.
How to Downgrade Your BMO Credit Card Successfully
Downgrading offers a strategic alternative to cancellation, allowing you to maintain your account while reducing or eliminating fees. BMO refers to this process as "product switching" and typically handles it without additional credit checks or application requirements. Your account number usually remains unchanged, though you'll receive a new card with updated design and features.
Most BMO downgrade requests can be completed through customer service channels rather than requiring branch visits. Representatives can explain available downgrade options based on your current card and account history. Product switches typically process within one billing cycle, with new cards arriving within 7-10 business days.
Your credit report won't show the product change explicitly—the account simply continues reporting with its original open date and credit limit. This preservation of account history represents one of downgrading's primary advantages over cancellation.
Finding the Right Downgrade Option
BMO offers several potential downgrade paths depending on your current card:
- Premium travel cards: Can typically downgrade to basic travel cards with reduced or eliminated annual fees
- Cash back premium cards: Often convertible to no-fee cash back versions with lower reward rates
- Specialty rewards cards: May convert to general rewards cards with simplified earning structures
Research available options before contacting BMO to identify your preferred downgrade target. The bank's website provides comprehensive card comparisons, though not all listed products may be available as downgrade options for your specific account.
Customer service representatives can confirm which specific cards are available for your account based on internal policies. Some premium cards may only downgrade to mid-tier options rather than basic no-fee versions.
Preserving Your Rewards and Benefits
Downgrading typically allows retention of accumulated rewards points, though conversion rates may apply when switching between different rewards programs. For example, travel points might convert to cash back rewards at a predetermined ratio. Ask specifically about point transfers before confirming your downgrade to avoid surprises.
Some benefits may transfer to your new card while others disappear. Common preserved features include:
- Credit limit: Your available credit line typically remains unchanged
- Payment history: Your account age and payment record continue reporting to credit bureaus
- Account number: Your primary account number often remains the same despite receiving a new physical card
Premium benefits like airport lounge access, enhanced travel insurance, and concierge services typically don't transfer to lower-tier cards. Evaluate which benefits you regularly use before downgrading to determine whether their loss justifies the fee savings.
When Cancelling Makes More Sense Than Downgrading
Despite downgrading's advantages, certain situations favor cancellation as the more appropriate choice. Duplicate cards with overlapping benefits create unnecessary complexity in your wallet without providing unique value. Maintaining multiple similar cards often results in underutilization while still incurring annual fees or mental overhead.
Cards with poor customer service experiences may warrant cancellation regardless of financial considerations. Consistently negative interactions suggest fundamental problems unlikely to improve through downgrading. Your financial products should provide both practical value and satisfactory service experiences.
Annual fees that significantly exceed your realized benefits, even after downgrading, indicate cancellation might be preferable. Some premium cards have no reasonable downgrade paths, forcing a choice between paying full price or cancelling outright.
Scenarios Where Cancellation Works Better
Consider cancellation in these specific circumstances:
- Relationship termination: When ending your broader banking relationship with BMO
- Simplification strategy: As part of an overall financial simplification plan reducing total accounts
- Better alternatives elsewhere: When competitor cards offer significantly superior value for your needs
- Limited downgrade options: When available downgrade paths don't align with your spending patterns
These situations represent exceptions rather than the rule. Most cardholders benefit more from downgrading unless specific circumstances dictate otherwise.
Minimizing Credit Impact When Cancelling
If you decide cancellation remains your best option, several strategies can minimize potential credit score impacts:
- Time your cancellation strategically: Avoid cancelling before applying for major loans like mortgages
- Increase limits on remaining cards: Request credit limit increases on other cards before cancelling to maintain overall available credit
- Keep your oldest card active: Preserve your longest-standing account to maintain credit history length
- Monitor your credit report: Check for proper reporting of the closed account status
These approaches won't eliminate all potential negative effects but can significantly reduce their impact. Remember that credit scores typically recover within 3-6 months following cancellation if you maintain good payment habits on remaining accounts.
How BMO's Banking Relationships Affect Your Decision
BMO offers relationship banking benefits that may influence your card decision. The BMO Family Bundle and Premium Chequing Accounts provide fee rebates on select credit cards, potentially eliminating annual fees without requiring downgrading. These relationship benefits sometimes make keeping a premium card financially viable despite its standalone fee.
Premium banking customers often receive preferential treatment when requesting product changes or fee waivers. Your existing relationship may qualify you for retention offers not advertised publicly. Customer service representatives have varying degrees of authority to provide incentives for maintaining your accounts.
Consider your entire BMO relationship before making card decisions. Cancelling your only BMO credit product might affect other account benefits or relationship pricing. Banking relationships function as ecosystems where individual product decisions can have broader implications.
Leveraging Relationship Benefits
BMO offers several relationship-based advantages worth considering:
- Annual fee rebates: Premium banking customers often receive complete or partial credit card fee waivers
- Preferential rates: Relationship pricing may provide improved interest rates on loans and lines of credit
- Service enhancements: Priority customer service access and reduced wait times
- Bundled discounts: Fee reductions across multiple products when maintaining relationship minimums
These benefits sometimes outweigh the apparent savings from cancelling a card, particularly when the annual fee receives a relationship-based waiver. Calculate your total relationship value rather than evaluating each product in isolation.
Negotiating Better Terms
Before finalizing any cancellation decision, contact BMO to discuss retention options. Banks often prefer keeping customers through concessions rather than losing them entirely. Potential negotiation outcomes include:
- Annual fee waivers: Temporary or permanent removal of annual fees
- Statement credits: One-time credits offsetting annual fee costs
- Bonus points: Additional rewards to increase your card's value proposition
- Product change suggestions: Representative recommendations for more suitable BMO products
Approach these conversations professionally, emphasizing your loyalty and desire to maintain your relationship under appropriate terms. Representatives respond more favorably to reasonable requests than ultimatums or threats to cancel.
Maximizing Your Credit Card Strategy Going Forward
Regardless of whether you cancel or downgrade, use this opportunity to optimize your overall credit card strategy. Your card portfolio should align with current spending patterns rather than past habits or aspirations. Analyze your typical monthly expenses to identify your highest spending categories, then select cards offering enhanced rewards in these areas.
Consider implementing a multi-card approach with complementary benefits rather than duplicate features. Many sophisticated cardholders maintain one premium travel card alongside a strong everyday spending card and perhaps a specialized card for their highest spending category.
Regular portfolio reviews prevent accumulating unnecessary cards or paying for unused benefits. Schedule annual assessments of your credit cards to evaluate whether each continues providing sufficient value relative to its costs.
Building an Optimal Card Combination
The most effective card strategies typically include:
- Primary everyday card: For routine purchases with broad reward categories
- Category specialist: Offering enhanced rewards in your highest spending areas
- Specific purpose card: For travel, business expenses, or other specialized needs
This combination maximizes rewards while minimizing unnecessary fees or complexity. Your BMO card might fill one of these roles through downgrading to the appropriate product level.
Monitoring and Adapting Your Strategy
Credit card offerings continuously evolve, requiring periodic reassessment of your portfolio. Set calendar reminders to review your cards annually, evaluating:
- Reward earning rates compared to alternatives
- Fee structures relative to benefits received
- Alignment with current spending patterns
- New market offerings that might better serve your needs
This proactive approach prevents paying for outdated products while ensuring you capitalize on improved offerings as they become available. The optimal credit card strategy evolves alongside your financial life rather than remaining static.
Make Your BMO Card Decision With Confidence
Deciding between cancelling and downgrading your BMO credit card requires balancing immediate financial considerations against long-term credit health. Downgrading typically offers the better option for most cardholders, preserving credit history and banking relationships while eliminating unnecessary fees. This approach maintains your credit score stability while providing continued card access with more appropriate features.
Cancellation remains viable in specific circumstances, particularly when suitable downgrade options don't exist or when you're intentionally reducing your total number of accounts. Proper preparation can minimize potential negative impacts on your credit profile.
Your decision should reflect your current financial reality rather than past spending patterns or theoretical future needs. The ideal credit card complements your lifestyle without imposing costs that exceed its practical benefits.
Taking Action on Your Decision
Once you've decided between cancelling and downgrading, implement your choice promptly to avoid additional fee cycles. Contact BMO through your preferred channel—phone, online banking, or branch visit—with clear communication about your intentions. Representatives can guide you through the specific requirements for your chosen option.
Document all interactions, including representative names, discussion details, and any promises regarding account changes or fee adjustments. This documentation provides valuable reference if questions arise during the transition process.
Remember that your credit card strategy should evolve alongside your financial journey. Today's decision isn't permanent—you can always apply for new products or request additional changes as your needs continue developing over time.
