It’s been a little more than a year since Chase’s premium credit card, the Sapphire Reserve, was released. That means many of you are (or will be soon) looking at whether or not the $450 a year card is worth keeping open, and if it’s not, what exactly your best play might be.
At the end of July I went over how to perform a cost/benefits analysis to assist you with deciding how to move forward in year two with the Sapphire Reserve. If you decided it wasn’t outright obvious for you to keep it open, then keep reading. Even if you decided to keep it, read this post anyways. It’s chock full of valuable information and strategy for managing Chase cards that will likely be helpful for you in the future.
How Chase Handles Annual Fee Refunds
First, let’s talk about your timeline as to when action needs to be taken.
- within 30 days of when the annual fee is charged, you get a full refund
- outside of the 30 day window, you will not get a refund
- within 60 days of when the annual fee is charged, you get a full refund
- outside of the 60 day window, you can still get a refund, it will just be pro-rated
Everyone is still in that 30 day window (if your annual fee has even been charged yet), even if you applied on the first day the card came out. You still have all your options–you could cancel or downgrade and still get a full refund on your annual fee.
Below I’m going to go over your options for downgrading and various other factors you’ll want to consider in this process, like:
- Chase’s new one Sapphire-branded card per customer rule
- How the value of your remaining Ultimate Rewards will be affected by downgrading considering what other Chase cards you have
Choices for Downgrading
You obviously should reap the full benefits of the Reserve as long as possible and shouldn’t consider a product a change until a year has passed anyways, but in case you weren’t aware: often Chase will only allow product changes after you’ve held a card for at least one year. However, I’ve read conflicting information regarding that point, so it seems that there is not a hard fast rule about how long you must have held a card to product change it.
One other point I’d like to bring up before diving in is that you will not earn the typical bonus offer for any of the cards below by product changing to them.
Here are your options downgrading from the Sapphire Reserve:
Sapphire Preferred, $95 Annual Fee
For a $95 annual fee, you could switch your Reserve to a Sapphire Preferred and earn 2 Ultimate Rewards per dollar spent on travel and dining. You’ll also maintain higher value Ultimate Rewards in two senses:
- Your points will still be transferrable to airline and hotel loyalty program partners like United, British Airways, Singapore, Flying Blue, etc.
- Your points will be worth 1.25 cents each when redeemed through Chase’s travel portal on cash reservations (versus 1.5 cents each with the Reserve)
You will also maintain travel insurance coverage that is almost as good as the Reserve’s.. Read Travel Protection Benefits of Chase, Citi, & Amex Cards: Comparison Chart for full details.
Freedom (No Annual Fee)
The biggest perk of the Freedom card is earning 5 Ultimate Rewards per dollar on the first $1,500 spent in categories that rotate quarterly, like..
That’s 30,000 bonus Ultimate Rewards a year if you maximize the categories (by utilizing methods like purchasing gift cards from merchants in the categories to use later).
Freedom Unlimited (No Annual Fee)
The biggest perk of the Freedom Unlimited is a earning 1.5 Ultimate Rewards per dollar spent on ALL purchases, with no cap and no category bonuses to track.
That being said, you’d have to spend $20,000 on the Freedom Unlimited to earn 30,000 Ultimate Rewards, and just $6,000 on the Freedom if you maximized each quarter’s category bonus. So I think the Freedom is a better choice for most, unless you absolutely cannot spend in the categories that are typically chosen.
The Freedom and Freedom Unlimited cards earn a type of Ultimate Rewards that are redeemed for cash back (1 cent each) unless you have a Sapphire Preferred, Sapphire Reserve, or Ink Business Preferred account to move them to. If you did, then they turn into the kind of Ultimate Rewards that can be transferred to airline partners for outsized value.
Keep in mind that if you live in the same household and/or are married to someone with a Sapphire Reserve, Sapphire Preferred, or Ink Business Preferred account, you could also pool your Ultimate Reward points with theirs to increase their value.
Sapphire (No Annual Fee)
You’ll get 2 Ultimate Rewards for every dollar spent on travel and dining, but they can only be redeemed through Chase’s travel portal at a fixed value of 1 cent each. This is the worst option out of all of the above.
I’ve read data points that Chase representatives might make you first downgrade to a Sapphire before product changing to a Freedom or Freedom Unlimited, so in that case it may be necessary as a preliminary step. But there’s no reason I can see to keep a Sapphire as a Sapphire.
Chase’s New Sapphire Rule
Chase just came out with a new rule that you should take into account when deciding what to do you with your Sapphire Reserve card.
Applicants will not be approved for another credit card in the Sapphire family if they already have one open. Cards in the Sapphire family are the:
- Sapphire (not available to new applicants, just as a downgrade option)
- Sapphire Preferred
- Sapphire Reserve
This means if you currently hold a Sapphire card, you’re not eligible for a new Sapphire Preferred nor a new Sapphire Reserve. If you currently hold a Sapphire Preferred, you’re not eligible for a new Sapphire Reserve. If you currently hold a Sapphire Reserve, you’re not eligible for a new Sapphire Preferred.
You are also not eligible for another Sapphire-branded card within 24 months of when you earned the bonus on your last one. So if you want the bonus on another Sapphire-branded card, you must wait 24 months past when you earned the bonus on all pre-existing Sapphire-branded cards, and then apply for the new one. To be clear, you don’t have to wait 24 months after you close your Sapphire-branded card(s), just 24 months past when the bonus(es) was(were) earned.
Because of this new rule, there is one circumstance in which I think canceling your Reserve is necessary, and even then it’s not necessary for another year.
The only instance in which you need to cancel your Sapphire Reserve is if you want to apply for a Sapphire Preferred (since it has to be closed before you apply for the Sapphire Preferred).
Note that you DON’T need to cancel right now. The only 24 month clock affecting your eligibility for a Sapphire Preferred is the clock that started when you earned the bonus on your Reserve. Closing your Reserve doesn’t reset the clock. You won’t be eligible for the Sapphire Preferred until 24 months after you earned the bonus on your Reserve, which is at the very least a year from now since the Reserve came out a year ago.
If you’re not concerned with opening a Sapphire Preferred as a new applicant, then you might as well product change your Reserve to one of the options discussed above to keep the account history aging for the health of your credit score & relationship with Chase.
The Value of Your Remaining Ultimate Rewards
When contemplating a product change/canceling, it’s also important to consider how the value of the remaining Ultimate Rewards earned by your Sapphire Reserve will be affected–especially if you only have the Sapphire Reserve and not a Sapphire Preferred nor an Ink Business Preferred.
Ultimate Rewards earned by the Sapphire Reserve, Sapphire Preferred, and Ink Business Preferred are different than the Ultimate Rewards earned by the Freedom or Freedom Unlimited because they can be transferred to Ultimate Reward airline and hotel partners (for outsized value) while the others are simply worth 1 cent each cash back. I also discussed this above in the Choices for Downgrading section.
If you already have a Sapphire Preferred or Ink Business Preferred, then there would be no issue downgrading your Reserve to a no annual fee Freedom or Freedom Unlimited, as you could simply move whatever unused Ultimate Rewards you have over to either your Sapphire Preferred or Ink Business Preferred account and preserve the ability to transfer them to airline/hotel partners.
If you didn’t already have a Sapphire Preferred or Ink Business Preferred, product changing to a no annual fee Freedom or Freedom Unlimited is trickier if you have a balance of unused Ultimate Rewards. You’d have to open an Ink Business Preferred (since opening a Sapphire Preferred would be off limits to you thanks to Chase’s new rules regarding Sapphire-branded cards described above). If opening an Ink Business Preferred isn’t an option either, you’d be forced into transferring your Ultimate Rewards preemptively to a frequent flyer program you regularly use or else just have your Ultimate rewards turn into 1 cent each when they become Freedom/Freedom Ultimate Rewards.
Like I said above, keep in mind that if you live in the same household and/or are married to someone with a Sapphire Reserve, Sapphire Preferred, or Ink Business Preferred account, you could also pool your Sapphire Reserve points with theirs to maintain their option value.
For the majority of you, it’s likely that the Sapphire Reserve is worth keeping for year two. If you decide it’s not, then take all of the above points into careful consideration to make a calculated decision.
What are you going to do with your Sapphire Reserve this year?