Product Changing From An Expensive Annual Fee Card

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The Chase Sapphire Reserve®, the Citi Prestige, and the The Platinum Card® from American Express card are premium credit cards with huge benefits and high annual fees to match.

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.

Case in point, the Chase Sapphire Reserve®.

The card has a $550 annual fee that is due immediately, however you will get $300 in statement credits in the first year.

The first $300 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 will be automatically offset by statement credits until you reach $300 in credits.

Second Year

So let’s say it’s been almost a year since you opened your Sapphire Reserve and the $550 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®, The Citi Prestige®, or The Platinum Card® from American Express 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 Chase Freedom Unlimited® or Chase Freedom Flex℠

The Chase Freedom Unlimited® or Chase Freedom Flex℠ cards are you best options when it comes to downgrading the Chase Sapphire Reserve®. Neither has an annual fee.

The Chase Freedom Flex℠ 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 Chase Freedom Unlimited® to earn the same amount of Ultimate Rewards, although you don’t have to concern yourself with category bonuses.

The Chase 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 Chase Freedom Unlimited®. You’ll earn more Ultimate Rewards than with the Chase Freedom Flex℠ card.

What happens to my leftover points if I downgrade?

The Ultimate Rewards earned by the no fee cards are worth 1 cent each and cannot, on their own, be transferred to any Ultimate Rewards partners, making them a different caliber of Ultimate Rewards than those earned by the Chase Sapphire Reserve®, Chase Sapphire Preferred® Card, or Chase Ink Business Preferred® Credit Card. However if you have one of the premium cards you can transfer points from your no annual fee cards to a premium card and they become the type of Ultimate Reward that can be transferred to airline/hotel partners, aka the Freedom Two Step.

The Platinum Card® from American Express to American Express® Green Card

The lowest annual fee charge card you can downgrade a Platinum card to is an American Express® Green Card. It costs $150 a year and earns 3 Membership Rewards for every dollar spent on travel, 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 American Express® Green Card are the same Membership Rewards earned by the Platinum Card® from American Express  –they can also be transferred to all airline and hotel partners.

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.