Consider your options before canceling your Chase Sapphire Reserve

Jan 28, 2020

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Now that some of the dust has settled from Chase’s decision to make significant changes to the Chase Sapphire Reserve credit card — including a higher, $550 annual fee — existing cardholders have to decide whether they want to keep it or consider other options. It’s understandable to be frustrated with a $100 increase in the card’s annual fee, especially since it already had a high price point. Some cardholders are also concerned they won’t get much use out of the new benefits. Although plenty of cardholders have decided to keep the Chase Sapphire Reserve because the value of its benefits still outweighs the cost of the annual fee, plenty of others plan to drop the Reserve.

Related reading: Here’s why I’m keeping my Chase Sapphire Reserve

If you’ve looked at the numbers and decided it’s not worth keeping the Chase Sapphire Reserve, you have a few options on how to proceed. Should you cancel your account? Ask for a product change? Let’s walk through some of the possibilities to see which one is best for your situation.

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Downgrading vs. canceling

If you hope to cut the Chase Sapphire Reserve from your personal credit-card lineup, there are two options. You can cancel it or you can request a product change to a card with a lower annual fee. In almost every situation, it’s better to downgrade than cancel.

Related reading: Chase Sapphire Reserve credit card review

One reason is that canceling a credit card can have a negative effect on your credit score. One of the most important factors that goes into determining your score is your credit-utilization ratio, which captures how much of your total available credit you are using. Canceling your Reserve, especially if it has a large credit line, would likely affect this calculation and could make it appear like you’re using a greater share of your total credit limit. Of course, you can work to rebuild your credit score but there could be short-term damage to your chances of being approved for new credit cards or receiving favorable terms on a loan.

(Photo by Isabelle Raphael)
Most of the time, it’s better to downgrade to a no-fee product, such as the Chase Freedom Unlimited than to cancel your account. (Photo by Isabelle Raphael/The Points Guy)

Chase’s 5/24 rule is something else to consider when looking at closing the account rather than downgrading. For those unfamiliar with it, Chase has an unpublished rule that states you aren’t eligible for a new Chase credit card if you’ve opened five or more personal accounts across all issuers in the past 24 months (hence the “5/24 rule”). If you cancel your Reserve and then apply for a new personal card to replace it, the application will count toward the 5/24 rule. And if that application is for a Chase credit card, including many of the Chase cobranded options, it is also beholden to that rule. A product downgrade, on the other hand, does not count as a new account and, therefore, will not count against your 5/24 score.

If you cancel your card, you’ll forfeit any protections the card provided and will also give up any additional perks on the card — including the $300 travel credit and the Global Entry/TSA Precheck credit. If you still have these available to you, try putting them to use before you pull the trigger and close the account.

Finally, by canceling the card you will likely forfeit any Ultimate Rewards that remain in your account. Of course, an easy workaround is to redeem them before cancelling, and there are a variety of ways to use your Chase points for great value:

RELATED: Best ways to use Chase Ultimate Rewards points

If you do decide to downgrade, there are eligibility requirements to keep in mind. When you request a product change, Chase requires that it stay within the same card family. For example, you can request a switch from the Chase Sapphire Reserve to the Chase Sapphire Preferred Card or Chase Freedom Unlimited. But you cannot request to switch from the Reserve to a cobranded card such as the Marriott Bonvoy Boundless Credit Card. You’ll also want to make sure that your account is in good standing. In general, the Credit Card Accountability Responsibility and Disclosure Act of 2009 does not allow you to upgrade to a card with a higher annual fee within the first year, but that shouldn’t apply to a situation where you have a Reserve and want to downgrade to a card with a lower annual fee.

Related reading: The best rewards credit cards for 2020

Downgrading to the Chase Sapphire Preferred

(Photo by Riley Arthur for The Points Guy)
The Chase Sapphire Preferred is a budget-friendly alternative to the Reserve. (Photo by Riley Arthur for The Points Guy)

This is probably the most common plan I’ve seen for getting rid of the Chase Sapphire Reserve. It makes sense, because the Preferred offers a similar card structure with a much more manageable annual fee. You still earn 2x on dining and travel. You have access to solid travel protections (including primary rental car insurance) and you get the same DashPass benefit as the Chase Sapphire Reserve (though not the $60 annual DoorDash credit). With a much lower $95 annual fee, the Chase Sapphire Preferred is a much more budget-friendly option to earn Chase Ultimate Rewards.

Related reading: Chase Sapphire Preferred card review

However, there is an important thing to remember when it comes to downgrading to the Chase Sapphire Preferred. If you request a product change, you are not considered a new cardholder and therefore, you are not eligible for the sign-up bonus. So by downgrading to the Chase Sapphire Preferred, you’re essentially forfeiting the potential to earn 60,000 bonus points (worth $1,200 according to TPG valuations) from straight up applying for the Preferred once you no longer have your Reserve.

You have to wait 48 months after earning one Chase Sapphire sign-up bonus before you can receive another. So if you got your Reserve just over a year ago, you wouldn’t be eligible for the Chase Sapphire Preferred bonus for almost three years. In that case, it might be best to go ahead and downgrade to the Chase Sapphire Preferred.

Downgrading to a no-fee Chase card

Another option is to downgrade your Chase Sapphire Reserve to a different Chase card that has no annual fee — the Chase Slate, the Chase Freedom or the Chase Freedom Unlimited. This way you eliminate the annual fee altogether without sacrificing your ability to earn the Chase Sapphire Preferred sign-up bonus if you choose to apply for it down the line.

You can downgrade to the Chase Freedom or Chase Freedom Unlimited to avoid paying an annual fee. (Photo by The Points Guy)

If you downgrade to the Chase Freedom Unlimited or Chase Freedom, there are similar drawbacks. Both offer a sign-up bonus that you’d be forfeiting by making a product change rather than by opening a new account. However, there is also a potential benefit to choosing them rather than the Slate. Because both the Chase Freedom and Chase Freedom Unlimited technically earn a basic version of Ultimate Rewards points, your existing point balance would transfer over when the product change happens. Although you wouldn’t be able to transfer them to partners or receive the redemption bonus through the Chase travel portal, it is a way to retain your points balance.

RELATED: Maximize your wallet with the perfect quartet of Chase cards

Of course, if you then applied for the Chase Sapphire Preferred in the future (or hold the Ink Business Preferred Credit Card), you could then transfer those points back into true Ultimate Rewards points that can be transferred or redeemed for 1.25 cents each through the Chase travel portal. Just remember that you must wait 48 months after receiving a Sapphire bonus before you can earn another one.

Which option is best?

Although it’s usually better to downgrade rather than cancel your credit card, there is strategy involved when choosing among products.

If you opened the Chase Sapphire Reserve when it first launched in August 2016 (and you are currently under 5/24), you may want to consider downgrading to the Chase Freedom or Chase Freedom Unlimited. Then you can apply for the Chase Sapphire Preferred as a new account to earn the bonus, but only after it’s been at least 48 months since you earned the bonus on the Reserve — which likely wouldn’t be until sometime next fall for most early Sapphire Reserve adopters. Both the Chase Freedom and the Chase Freedom Unlimited make great partners to the Preferred, so they are more valuable to have in your wallet than the Chase Slate, which doesn’t earn points.

However, if one (or more) of the following is true, you may want to consider downgrading to the Slate instead:

  • You already have both the Freedom and Freedom Unlimited: There may not be a compelling reason to add another iteration of these cards to your wallet.
  • You want to earn the sign-up bonus on the Freedom or Freedom Unlimited: As noted above, if you downgrade, you aren’t eligible for a new cardmember bonus on either card.
  • You don’t have any remaining Ultimate Rewards points: In this case, you don’t have any accumulated rewards that you’d forfeit.

If you are either over 5/24 or will not be eligible for the Chase Sapphire Preferred sign-up bonus anytime soon, it might make the most sense to go ahead and downgrade to the Chase Sapphire Preferred. The only reason to apply for the card separately is so you can earn its sign-up bonus. But if that’s not a possibility, choosing it as your product change is a great option.

Finally, remember that you shouldn’t rush to make a decision. The annual fee on the Sapphire Reserve won’t be going up for existing cardholders until your first renewal on or after April 1, 2020, so if your annual fee comes due before that date, you’ll enjoy the new perks with the old annual fee ($450) until your next renewal in 2021. And even if you’re subject to the higher annual fee after that grace period ends, you might as well use the new benefits until your renewal. This will give you time to evaluate the benefits and make an informed decision on whether or not to keep the card, cancel it or downgrade the card.

The information for the Chase Slate card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Bottom line

With the increased annual fee going into effect for existing cardholders after April 1, 2020, now is an excellent time to consider whether or not the Chase Sapphire Reserve still deserves a spot in your wallet. For many, the new benefits and existing value outweigh the cost of the increased annual fee. Therefore, it’s worth keeping. But for others, it could be time to consider other premium credit-card options.

If you plan to get rid of the Chase Sapphire Reserve, consider downgrading your card rather than outright canceling. That way you keep your account open, which helps maintain your credit score. Chase has multiple no-fee options you can request as your product change, which opens you up to apply for the Chase Sapphire Preferred Card down the line to score its bonus (mind the 48-month waiting period between Sapphire bonus eligibility).

Featured photo by The Points Guy

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