Product Changing From An Expensive Annual Fee Card

11
2070

The Chase Sapphire Reserve, the Citi Prestige, and the Amex Platinum card are premium credit cards with huge benefits and huge annual fees to match: $450.

The first year, these are fantastic cards. The second year, the value is less certain. We’ll look at canceling and downgrading options in this post.

The First Year

Many people are scared off by that annual fee, which makes sense at a superficial level. We all got interested in miles and points to save money, not spend it. I was afraid of premium cards when I first jumped in the game. But do the math and these cards are all well worth it for the first year when their big bonuses and two statement credits–for $400 to $600 worth of free travel–before the second annual fee is due.

Case in point, the Sapphire Reserve.

The card has a $450 annual fee that is due immediately, however you will get $600-$700 in statement credits in the first 12 months you have the card, which means you should profit $150-$250 in cash plus 100,000+ points (at the old sign up bonus, 50,000 points now) in the first year.

The first $600 in statement credits come from the automatic rebate of the first $300 you spend on the card in the travel category each calendar year. So all your airfare, flight award taxes and fees, airline fees, hotels, Airbnb, car rentals, cruises, tolls/E-Z Pass, parking, Uber/Lyft, taxis, etc that you charge to the card until December will be automatically offset by statement credits until you reach $300 in credits. Then the credit resets for 2018, and you can get another $300 in free money before your next annual fee is due.

Second Year

So let’s say it’s been almost a year since you opened your Sapphire Reserve and the $450 annual fee is going to hit shortly. That means it is time to do a cost/benefit analysis. Are you getting enough value from the card to hold it? Consider the ongoing benefits like category bonuses, travel statement credits, and lounge access.

To Cancel or Downgrade?

You decide it’s not worth it to you keep the card open another year. What next? Do you cancel? Sure, that’s one option–but not the only one. Many banks will allow you to downgrade a credit card to a different product with a lower or no annual fee.

There are many reasons why you’d want to downgrade a card with an expensive annual free rather than just cancel it. For example:

A) to maintain your credit utilization ratio (how much you owe on credit cards compared to how much you can spend)

B) to maintain a relationship with a bank 

C) one of the downgrade options has an attractive reward earning structure that you want to take advantage of

D) it’s a Chase Sapphire Reserve, Citi Prestige, or Amex Platinum and you don’t want your points to disappear (canceling one of these with a balance of points means you lose all the points)

Below are the best no (or low) annual fee options to consider when you’re faced with a decision 11 months into holding a premium card.

Chase Sapphire Reserve to Freedom or Freedom Unlimited

The Freedom or Freedom Unlimited card are you best options when it comes to downgrading a Sapphire Reserve card. Neither has an annual fee.

The Freedom card earns 5 Ultimate Rewards per dollar spent on quarterly rotating category bonuses. Your rewards earnings are capped at $1,500 purchases per quarter. If you are able to max out the category bonuses each year, this card may prove more lucrative than the Freedom (5 x $1,500 cap = 7,500 Ultimate Rewards per quarter, 7,500 x 4 = 30k Ultimate Rewards per year for $6k in spending. You’d have to spend $20k on the Freedom Unlimited to earn the same amount of Ultimate Rewards, although you don’t have to concern yourself with category bonuses.

The Freedom Unlimited earns 1.5 Ultimate Rewards per dollar spent on anything. If you can put more than $20k amount of spending on this card annually, then opt for the Freedom Unlimited. You’ll earn more Ultimate Rewards than with the Freedom card.

Frequent Miler reported that he was able to downgrade his Sapphire Reserve to a Freedom Unlimited card, but only after first transitioning it to a Sapphire (no annual fee) card first. It probably depends on the person, but if the Chase representative says you can’t downgrade your Sapphire Reserve to a Freedom or Freedom Unlimited card, ask them instead to downgrade to a Sapphire first. Apparently anyone can product change a Sapphire to a Freedom or Freedom Unlimited.

What happens to my leftover points if I downgrade?

The Ultimate Rewards earned by the Freedom and Freedom Unlimited are outright worth 1 cent each and cannot, on their own, be transferred to any Ultimate Rewards parters, making them a different caliber of Ultimate Rewards than those earned by the Sapphire Reserve, Sapphire Preferred, or Ink Business Preferred. However if you have a Sapphire Preferred or an Ink Business Preferred open, you can transfer points from your Freedom or Freedom Unlimited to it and they become the type of Ultimate Reward that can be transferred to airline/hotel partners, aka the Freedom Two Step.

Citi Prestige to ThankYou Preferred 

The ThankYou Preferred is your best option to downgrade to from a Citi Prestige card. The ThankYou Preferred has no annual fee and earns 2 ThankYou points per dollar spent on dining and entertainment and 1 ThankYou point per dollar spent on everything else.
screen-shot-2016-11-18-at-7-59-52-pm

What happens to my leftover points if I downgrade?

The ThankYou Points earned by the ThankYou Preferred are outright worth 1 cent each. They can’t be transferred to all the airlines ThankYou Points earned by the Prestige (or Premier) can, but if you have a Premier open, you can pool points from your ThankYou Preferred to with it and they become the type of ThankYou points that can be transferred to airline/hotel partners.

American Express Platinum Cards to Green or EveryDay

The Amex Platinum cards are charge cards. Note that you cannot downgrade a charge card to a credit card nor a credit card to a charge card.

The lowest annual fee charge card you can downgrade a Platinum card to is an Amex Green card. It costs $95 a year and earns 2 Membership Rewards for every dollar spent through the Amex travel portal, and 1 Membership Reward for every dollar spent on everything else.

What happens to my leftover points if I downgrade?

The Membership Rewards earned by the Amex Green are the same Membership Rewards earned by the Platinum–they can also be transferred to all airline and hotel partners. If you just want to preserve your Membership Rewards leftover from your Platinum card and it’s worth paying $95 to do it, then maybe the Green card is right for you. But if you don’t mind a hard credit inquiry, you can preserve your Membership Rewards’ value and earn them more quickly with the EveryDay card which has a much better earning structure (its Membership Rewards can also be transferred to airline and hotel partners).

You can’t product change to an EveryDay card as it’s a credit card while your Platinum is a charge card.

Tips for Downgrading Any Card

As many of you have probably experienced before (I know I have!), not all bank representatives are equally knowledgeable. Different representatives may give you different answers regarding what options you have for downgrading. If you don’t like what you hear, hang up and call again.

If you do downgrade a card, make sure you don’t suffer a new hard credit inquiry (i.e. you don’t have to fill out another application.)

Bottom Line

If you read this blog regularly or managed to find it on your own, you are probably the type of person that spends enough on travel to make paying at least one annual fee on any premium travel card worth it.

Whether or not it’s worth keeping past the first year will depend on you.

If you do decide you don’t want to pay another annual fee, know that there are options aside from just canceling, which you especially don’t want to do if you have a considerable balance of points left. Consider a product change to one of the cards listed in this post.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

If you liked this post, sign up to receive one free daily email every morning with all of the day’s posts! You can also follow MileValue on Twitter and Facebook.

11 COMMENTS

  1. What if you already have the no fee card that you could downgrade to? I.e. I’ve had the Citi Preferred for 6 years since I was a college student. I got the Prestige last year but my one year comes up next month. I don’t intend on keeping the Prestige, but can I downgrade to the Preferred if I already have that?

  2. Would it be possible to downgrade a ty to an att access or access more? And are you sure ty points won’t expire after pc, I’ve heard otherwise…

  3. U read my mind I’m looking @ Citi P card just got Citi AA card I need free rooms or I won’t go anywhere.
    1) Get card in mid July spend min transfer points to Singapore air get RT ticket to Hawaii from ord .Call to Book but check united flts FIRST record flt numbers .
    3) Book rooms in blocks of 4 or 5 IF I can find hotel who gives 5th free (Spg) just used them $$$.
    4) Go to South Beach 4 or 5 nites in April 2018 like I have booked now .
    5) Book rooms in EU in blocks of 4 or 5 nites in MAY 2018 .
    6) Have June and July billing cycle to get money back then CANCEL CARD.
    7) What do I spend the $250 travel credit on to get it back ?
    8) Can I wait till 1/1/2018 and have a $500 or do I have to SPEND $250 year ???

    SOUND CORRECT ??

    THANK YOU

    • You have to spend $250 per calendar year for the Prestige’s air travel credit. It can be on any airfare, airline gift card, airline fee, etc that shows up as an airline purchase on your statement.

    • Yes it should be an option. ThankYou Points earned by the Premier also transfer to airline partners.

LEAVE A REPLY

Please enter your comment!
Please enter your name here