Exit strategy: If you’re leaving the Chase Sapphire Reserve, be sure to consider this angle

Jan 21, 2020

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Reader Questions are answered twice a week by TPG Senior Points & Miles Contributor Ethan Steinberg.

Chase recently made the highly anticipated announcement that it would be raising that annual fee on the Chase Sapphire Reserve to $550 a year while adding new benefits, statement credits and bonus categories for Lyft and DoorDash purchases. Some customers view this change as an increase in the value proposition of the Sapphire Reserve, while others aren’t sure if they’ll renew their card when the higher annual fee kicks in. TPG reader Richard wants to know what happens if he cancels his Sapphire Reserve before taking an award trip booked with Ultimate Rewards points …

If I have bought a plane ticket and a car rental with Ultimate Rewards points for a trip in August, will there be any problem with those reservations if I cancel my CSR card in June before my renewal July 1 to avoid the new higher annual fee?

TPG READER RICHARD

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This is a great question Richard, as you should never cancel a credit card without thinking about the implications it has for your credit score and your hard-earned stash of points. Let’s start there, as that’s the most immediate effect: If you cancel your Sapphire Reserve and don’t have any other Chase Ultimate Rewards cards, you’ll forfeit all points associated with the card. This is a direct contrast to most hotel and airline credit cards, where the points are linked to you frequent flyer or hotel loyalty account and not the card account (meaning you can close the card without losing your points).

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

Depending on how long Richard has had his Sapphire Reserve open, closing it could have a negative impact on his credit report as that card will stop boosting his average age of accounts. Instead of cancelling, he might want to consider downgrading to a no-annual-fee card like the Chase Freedom (No longer open to new applicants) or Chase Freedom Unlimited. These cards both earn “cash-back rewards,” though if Richard has another Ultimate Rewards-earning card or opens one in the future, he could move the points from his Freedom family card to that card and then transfer them to airlines or hotels. The other nice thing about a no-annual-fee card is that you can keep it open forever, which will be a nice boost to your credit score.

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

Related: Chase Freedom versus Chase Freedom Unlimited: Which card is right for you?

Now let’s turn to upcoming travel reservations. Whether Richard booked his travel directly through the Chase Ultimate Rewards portal or transferred his points to a travel partner, his reservation is paid for already and will still be honored even if the card is closed. Just like if this were a cash reservation, once it’s paid for it doesn’t matter if the card is opened or closed.

The only caveat here is that some airlines, especially for flights in foreign countries that are especially prone to fraud, may ask you to show the card used to book the flight when checking in. My girlfriend was denied boarding from an Etihad flight out of Rabat, Morocco (RBA) because we paid for the flight with my Amex Platinum and I wasn’t traveling with her. In that case, even if Richard cancels the card he might want to hold on to the physical hunk of metal and bring it with him on his trip, just in case the airline asks to see it as proof of purchase.

The other issue Richard has to think about is the various travel insurance benefits that come with the Chase Sapphire Reserve, such as trip delay, cancellation and interruption insurance, baggage loss and delay, and Chase’s industry-leading primary rental car insurance. These policies alone might make the Reserve worth keeping open, even if you aren’t thrilled about the increasing annual fee.

Related: The best credit cards for rental car coverage

Unfortunately, if your account has been closed at the time of travel, you won’t be covered by any of these insurance policies even if you booked the trip with your Sapphire Reserve. A single trip cancellation claim can easily exceed the $550 annual fee of the Sapphire Reserve, and there’s something to be said for peace of mind. Richard should weigh this when deciding whether or not to close his Sapphire, and if he does decide to close it, he might want to look into buying supplemental third-party travel insurance or downgrading his card to the Chase Sapphire Preferred Card, which has similar benefits but only has a $95 annual fee.

Bottom line

If Richard decides to close his Sapphire Reserve before his upcoming trip, his actual reservations won’t be affected in any way. The two big downsides to consider are that he might end up losing any unredeemed points he has, and he’ll definitely be giving up a very comprehensive package of travel insurance benefits. If the Sapphire Reserve’s annual fee is steeper than he wants to pay, he should strongly consider downgrading, either to the Chase Sapphire Preferred® Card or to a no-annual fee-card like the Chase Freedom Unlimited.

Thanks for the question, Richard, and if you’re a TPG reader who’d like us to answer a question of your own, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.

Featured photo by The Points Guy.

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Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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