Published on January 12th, 2016 | by William Charles67
Keep, Downgrade, Cancel: Chase Sapphire Preferred
I thought it would be fun to start a new series of posts titled ‘Keep, Downgrade or Cancel’ basically the idea would be to look at a card that has an annual fee and to see if it’s worth keeping, downgrading or cancelling the card. Chase Sapphire Preferred gets a lot of coverage, so why not start there!
Chase lets you downgrade this card to two other no annual fee cards: Chase Freedom & Chase Sapphire. I think the Chase Freedom is the most compelling choice as it earns 5x points in rotating categories (maximum $1,500 spend per quarter). Though the Chase Sapphire could be worth considering for people with high restaurant spend as it earns 2x points on those purchases.
Those 5x categories will let you earn a maximum of 30,000 points per year, you’re baseline should always be 2% cash back so the Freedom will be worth a maximum of 30,000 points – $120 in cash (the amount you would have earned from a 2% card if you put $6,000 in purchases on it).
I don’t always max out my Freedom categories though, I value each Freedom card I have at about $150 per year – but the value you get on it will highly depend on what you’re spending patterns are like.
This card comes with an annual fee of $95, for it to make sense to keep this card you’d need to get more than that in value. Let’s look at a few reasons why this card is worth keeping and then discussing how much value that holds.
- Ability to transfer Chase Ultimate Reward (UR) points to travel partners (including points earned from non premium cards such as Chase Ink Cash or Chase Freedom)
Probably one of the best features of this card, although it’s important to remember that the Chase Ink Plus also comes with this ability, the same annual fee and also earns 5x points at office supply stores, cellular phone, landline, internet and cable TV services. How much this is worth is easily to calculate, Chase UR points are worth 1¢ a piece when redeemed for statement credit. If these points are worth 2¢ to you when transferred, then this card adds 1¢ per transferred point.
- 2x points on dining & travel
This card earns 2x Chase UR points on dining & travel purchases. It’s difficult to get a category bonus on dining/restaurant spend, the best option only earns 3% cash back (apart from cards with temporary bonuses or rotating categories). Given the Chase Sapphire also earns 2x points on this category and it’s a downgrade option, it’s hard to assign any value in this spending category.
There are a lot of cards that offer bonused spend on travel expenses, although most just give 3x points on airfare or are for a specific hotel or airline. This could be useful for some people, but those that are brand loyalty might be better off with the co-branded cards.
- 20% off travel redemption
If you redeem points through the Chase travel portal, you’ll get a 20% discount. This means points are worth 1.25¢ a piece (if Chase are showing the same rates as other travel portals). Giving you an extra 0.25¢ per point in value.
- Retention bonuses
Most annual fee cards will offer you some type of bonus for keeping the card if you decide to cancel. Chase rarely offers any retention bonus on this card, although the most common offer I’ve seen is 10,000 points for $3,000/$4,000 in spend. Most of the people that do receive retention bonuses are people that have held the card for more than one year.
I don’t think cancelling the card makes much sense at all, you’d be better off just to downgrade it instead. This wasn’t always the case (e.g if you hadn’t gotten the bonus on the Chase Freedom then cancelling outright might have made sense) but given the new 5/24 rules it’s doubtful you’d get approved anyway.
I think the Chase Sapphire Preferred is one of the most over rated cards on the market, they removed 3x first Fridays on dining spend, the 7% annual dividend and many more features of the card that made it worth it. Now that it’s almost impossible to get approved for this card for people in this hobby, I doubt I’ll ever hold this card again and I’ll certainly never pay an annual fee for it.
The only way I could see it being worth it is if you had a few Chase Freedom’s and couldn’t get approved for an Ink Plus and valued the ability to transfer points and that’s a lot of If’s.
Think I’m wrong? Let me know why in the comments.