Downgrading the Chase Sapphire Preferred to the Freedom Unlimited

We recently downgraded a Chase Sapphire Preferred card to a Chase Freedom Unlimited. But why?

We recently downgraded a Chase Sapphire Preferred card to a Chase Freedom Unlimited. But why?

One of the early credit cards I obtained when I first dipped my toe into the world of points and miles was the Chase Sapphire Preferred Visa. In addition to a 40,000 point sign-up bonus at the time, the card attracted me by offering double points on travel and dining, primary car rental insurance (perhaps my favorite benefit), and a great lineup of airline transfer partners. To this day, the Sapphire Preferred is my primary card for dining out, though I have other cards that offer a similar bonus on restaurant spend. So, if I value the Sapphire Preferred so much, why would I downgrade to a Chase Freedom Unlimited? Well, more accurately, we downgraded my wife's account and it's more complicated than not needing two accounts with the same card.

My wife's background with points and miles cards

Since I received my Chase Sapphire Preferred card over two years ago, I met my wife and ultimately was married last winter. When we first met, my points and mile interest became a topic of conversation as I told her of a trip to Germany I had planed for the following month. 

About a month after our first date, Georgia Tech announced that 2016 football season opener would take place in Dublin, Ireland. Because I was working on a consecutive game attendance streak approaching 100 games at that time, I knew I had to be in Dublin for the game. By fall 2015, things were going well with my then-girlfriend and we were talking about a trip to Europe for the game. Knowing she would need points and miles so we could fly in a premium cabin, I urged her to signup for a couple of reward credit cards. One of those was the Chase Sapphire Preferred. She earned the signup bonus and has used the card since then, amassing a balance sufficient for a one-way business class ticket to Europe for summer 2018 (we wound up using another program to book her ticket for the Ireland trip).

Before going to the Georgia Tech game in Ireland, we visited Segovia, Spain. (click to enlarge)

With her ticket for our 2018 vacation booked her balance has dropped to near zero. She is an authorized user on my Sapphire Preferred so we really don't need both cards any longer. However, I did not seriously entertain the idea into a downgrade until the recent leak of the new application rules for the Chase Sapphire family of cards.

Only one Sapphire product at a time now

Customers can now only have one Sapphire-branded credit card

Customers can now only have one Sapphire-branded credit card

Late last month, Chase circulated an internal memo outlining restrictions on sign-ups for any of its Sapphire card products. You can check out the Million Mile Secrets article for full details,  but the key takeways were:

  1. Going forward, a customer may no longer have more than one Sapphire-branded credit card.  For example, if a customer has a Sapphire Preferred card, they are no longer eligible for a Sapphire Reserve card. If someone already has multiple Sapphire products, you can keep them.
  2. If a Sapphire account is closed, a customer will not be eligible for any Sapphire-branded credit card if they have earned a cardmember bonus on a Sapphire-branded product within the last 24 months.
  3. Frequent Miler suggests there may be a loophole. If you want to get a signup bonus on a Sapphire product but have another card Sapphire-branded card, you may be able to downgrade the existing card to a non-Sapphire card such as the Freedom or Freedom Unlimited. After the downgrade, assuming you have no other Sapphire products and if you have not received a Sapphire sign-up bonus in the last two years, you could possibly apply for and be approved for a new Sapphire offer.

In my wife's case, the only Sapphire product she has is the Sapphire Preferred. Also, she earned her signup bonus over two years. Since she is an authorized user on my card but I am not a user on hers, my thinking was to keep my Sapphire Preferred card and try the Frequent Miler loophole" with her card. We knew that we wanted to downgrade rather than close her Sapphire Reserve account since Freedom cards can offer attractive points-earning. If she is not approved for a new Sapphire Reserve, she would still have a Freedom product that would earn cash-back which is paid out as Ultimate Rewards points.

Preparing to downgrade

I like that the cash reward is paid in points. Points earned from premium Ultimate Rewards card products such as the Sapphire Reserve, Sapphire Preferred or Ink Business Bold can be transferred to travel partners such as airlines and hotels The Ultimate Rewards points earned on a Freedom card can be transferred to these premium card products and become eligible to transfer to travel partners. Chase also allows you to transfer points to another household member:

"You can move your points, but only to another Chase card with Ultimate Rewards belonging to you, or one member of your household."

If my wife is approved for a Sapphire Reserve card, she can transfer Freedom points to her new account. Otherwise, she can transfer them to my Sapphire Preferred account.

While I understand the cash-back earned by Freedom cards is actually Ultimate Rewards that can be converted to cash, I was not completely clear if my wife would lose the small point balance remaining in her Sapphire Preferred account upon downgrade. To be safe, we transferred approximately 600 points from her account to mine, leaving a zero balance. The next step was to identify which Chase Freedom card we wanted.

Selecting a Freedom product

There are two options in the Freedom card family: the Freedom and the Freedom Unlimited, both issued as Visas. The biggest difference is the points earning rates. 

  • Freedom: Card earns "5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate and unlimited 1% cash back on all other purchases."
  • Freedom Unlimited: Card earns "unlimited 1.5% cash back on every purchase."

Comparison of the Chase Freedom Unlimited and Chase Freedom cards (click to enlarge)

With both cards, each cent earned in cash-back is actually one Ultimate Reward point since these points can be redeemed for cash at the rate of $0.01/point. For example. if you make a $10 purchase in a Chase Freedom bonus category, you would earn $0.50 which would be deposited as 50 Ultimate Rewards points in your account.

While the quarterly 5% bonus categories are potentially lucrative for categories in which we spend a lot of money, the steady 1.5% earning rate would work better for us. We spend a lot of money at Costco which only accepts Visa cards. During periods when the Freedom offers 5% bonus at wholesale clubs, that card would be a better choice. However, if wholesale clubs are not a bonus category, as has been the case this year through the third quarter, the Freedom Unlimited would be the preferred choice. In addition, the 1..5% rate would make the Freedom Unlimited an attractive card for any spend not bonused by one of our other credit cards.

Since my wife is not as passionate about points and miles as I am, I do not want to burden her with a long checklist of which card to use at what type of merchant. I prefer to keep give her general guidelines on where to use one or two cards and then suggest she put all other purchases on a card that earns a good overall return. Currently, my default card for unbonused spend is the American Express Everyday Preferred card which can earn up to 1.5x American Express Membership Rewards Points per dollar. However, given that Ultimate Rewards points are slightly more valuable the Membership Rewards points, we would likely make the Chase Freedom Unlimited card her default card.

Calling Chase

After we knew which card we wanted, my wife called Chase to request the downgrade. She was able to quickly speak to a customer service representative and informed the agent that she wanted to downgrade her Chase Sapphire Preferred to the Chase Freedom Unlimited. When asked her reason, she replied that she simply did not want to pay the annual fee. My working assumption is that it is far easier to give them a simple answer than go into the "points and mile" rationale. Another reason for that is to avoid any possibility that your profile could be flagged as a card churner - if they even do such a thing. Better safe than sorry.

When asked if she wanted to add any authorized users to her account, she told them no. I do eventually want to carry this card to use for my Costco gas purchases as well as other unbonused spend. However, we learned the hard way after we got married and added my wife as an authorized user on several of my cards that those authorizations appear as an account on your credit report. I want to apply for the Chase Sapphire Reserve and Chase Ink Business Preferred but I am already out of compliance with Chase's 5/24 rule for a few more months. Once I add these premium cards to my portfolio, I will become an authorized user on my wife's Chase Freedom Unlimited card.

Conclusion

This process probably sounds like a lot of effort, but it really wasn't, especially if you have a working knowledge of points and miles credit cards. Fortunately, calling Chase was fairly painless and the new card arrived in about one week.  My wife is now positioned to apply for the very attractive Chase Sapphire Reserve Visa. Even if there is a small degree of work, that's a small price to pay to amass the rewards that allow us to fly in the pointy end of the airplane back and forth to Europe every year!