I’m About To Be Charged My Chase Sapphire Preferred Annual Fee, What Should I Do?

Question:

I got my Chase Sapphire Preferred almost twelve months ago, I’m almost due to pay my annual fee and I’m wondering what I should do. I like the ability to be able transfer my points to different airlines (especially United) but I dislike the idea of paying for an annual fee.

Answer:

Your annual fee will either be $95 or $125 (when Chase has a sign up bonus of 50,000 points instead of 40,000 they also increase the annual fee of the card). Before doing anything I’d call Chase (or send a secured message) and say that you’re considering cancelling your card due to the annual fee, I haven’t heard of any recent success stories with Chase waiving the second years annual fee recently – but it’s always worth a shot.

In terms of what you should do, you have a few different options which I’ll outline below, along with the pros and cons of each.

Option 1: Pay The Annual Fee

This is pretty straight forward, you pay the $95 annual fee and keep the card. This is the best option for those who value being able to transfer their points and spend a lot at restaurants and on travel.

Upsides:

• You’ll receive the 7% annual points dividend (you only receive this on points earned, sign up bonuses and transferring points (e.g from Chase Freedom) doesn’t count).
• You’ll be able to continue to transfer your points to Chase’s transfer partners.
• No foreign transaction fee
• 2x points on travel

Downsides:

• You’ll have to pay the $95/$125 annual fee. If you do have the card with a $125 annual fee, call them to request it be downgraded to the $95 option.

This option will be the best for those who travel regularly or put a lot of spend through their cards.

Option 2: Downgrade To The Regular Chase Sapphire

Upsides:

• This card has no annual fee
• The account opening date will stay the same, meaning the average age of your accounts will continue to rise. An important scoring factor for your FICO credit score.
• No hard credit pull is done

Downsides:

• You can’t transfer your Chase UR points to their travel partners
• You won’t receive the 7% annual dividend on future purchases
• Foreign transaction fee of 3%
• Card isn’t made of metal (some people actually care about this, shocking I know)
• No 20% off travel when booking through the UR portal
• No 2x points on travel (you’ll still receive 2x points on restaurants)
• You won’t be able to earn the sign up bonus on this card (usually 10,000 Chase UR points)
• No EMV chip

This will be the best option for most people. You’re able to continue aging your account and still be able to earn 2x points on dining.

Option 4: Cancel The Card

Upsides:

• You’ll have one less Chase card. Some people have reported being declined for other Chase cards when they hold four or more cards. Chase has some of the best sign up bonuses on the market, so if this happens it may be worth cancelling the card. On the other hand people report having 8+ Chase cards without any issue.
• No annual fee
• Possibility to earn the Chase Sapphire Preferred bonus in the future

Downsides:

• Your account will no longer be aging, which will cause the average age of your accounts to decrease.
• You don’t have the ability to earn chase UR points

This is only the best option if you have a lot of Chase cards already, or have been told by Chase that you won’t be approved for future cards. We haven’t seen much evidence that people have been able to re-earn the CSP sign up bonus, even after a wait of two years or more.

Our Verdict

For the vast majority of people, downgrading to the regular Chase Sapphire or Chase Freedom card is going to be the best option. We’ve outlined the cases in which you should keep the Preferred card below.

• When you spend $3166.67 on more internationally per year. This is because the Preferred has no international fee, whilst the Regular/Freedom has a fee of 3% (95 / 0.03).
• When you spend $9,500 or more on travel (and restaurants if you choose the Freedom) per year. This is because you get an extra 1 point per dollar spent on travel. This number assumes you value your points at 1¢ per point, it will obviously be much lower if you value your points more than this.
• You spend more than $135,714.29 annually (this assumes you don’t have a Chase checking account and the Freedom for the 10% combo). This is the number you’d need to spend to get $95 worth of points with the annual 7% dividend (95 / 0.0007). Again this assumes you value points at 1¢ per point. It also presumes that none of the points are earned on travel/dining, if they are you need to divide this number by two.

All of this also presumes that you don’t have another credit card with no international fees and a good rewards program. You can always downgrade to the Chase Sapphire or Chase Freedom and then get the Barclaycard® Arrival™ World MasterCard – Annual Fee which also has no international fees and the first year fee waived.

We suggest downgrading to the Chase Freedom as you’ll be able to enroll in the 5% cash back categories, which could earn you $300 extra per year. The sign up bonus for this card is usually pretty low, so by downgrading you aren’t missing out on much but still get the best benefit of this card.

We don’t suggest just cancelling this card because it’ll lower your average age of accounts in the future and you’ll miss out on the 5% categories. To cancel or downgrade your Chase Sapphire Preferred you should either call Chase or send them a secured message.

Have you downgraded this card before? What did you choose? Let us know in the comments.