Erik Van Dootingh 
Comments
June 25, 2020 
Chase recently sent out a survey to selected cardholders to gauge opinions on several potential negative changes that could be made to the Ultimate Rewards program and its associated credit cards. While no changes are imminent, this survey could give us some insight into what may occur in the future. Since program devaluations are a constant source of risk in the travel rewards game, it helps to consider which opportunities currently provide outsized value that may be ripe for devaluation.
Chase Survey
Below are the three relevant options on how the program might change:
1) When you combine the Ultimate Rewards points on eligible Chase Cards they would retain their original redemption value – that is, when transferred the points would retain the redemption value of the product they were initially earned on. For example you would not earn a travel redemption bonus if your transfer from a no fee card to a Fee card. (For example, if you transferred points from a Freedom card, you would not get the 1.25 cents per point redemption value offered by the Sapphire Preferred when booking travel through the Chase portal).
2) You can only combine Ultimate Reward points between
3) You can combine Ultimate Rewards points on eligible Chase cards at a 3:2 conversion ratio. For example if you would like to transfer 15,000 points from your Freedom Unlimited card to your Sapphire Reserve account, your Sapphire Reserve would be credited with 10,000 points (a 3:2 ratio). The transferred points would be granted the redemption value and options of the account to which they are transferred into.
Analysis of Alternatives and Ways You Can Protect Your Points
Option 1
Out of the three alternatives, option 1 seems the most likely to actually be implemented someday. When the Sapphire Reserve came out, the blogosphere went crazy about the ability to put an effective floor of a 2.25% return under Ultimate Rewards travel redemptions. The logic is that you can earn a minimum of 1.5 points per dollar by using the Freedom Unlimited card, and redeem for a minimum of 1.5 cents per point by holding a Sapphire Reserve card and booking through the Chase travel portal. 1.5 x 1.5 = 2.25%, which is a very good return, especially in the context of direct redemptions rather than award bookings. This is a better return that you would get on fixed value cards such Barclay Arrival Plus or Capital One Venture rewards.
However, sometimes a return can be too good. If an opportunity is not profitable for the bank offering it, the likelihood that it will come to an end is much greater. Banks are able to offer lucrative travel rewards credit cards due to the interchange fees they earn when people use their cards to make purchases. The precise amount of these fees varies by issuer, card type, and merchant etc. but generally the issuing bank will earn between 2% to 2.5% of each transaction. This amount needs to not only cover the cost of the rewards issued, but of other costs and risks associated with offering credit cards as well. This is why it is so rare to see a credit card offering more than 2% cash back without a cap – it’s simply not profitable for the banks.
Since the combination of Freedom Unlimited and Sapphire Reserve can achieve a 2.25% return, this is probably a money loser for Chase. Of course, we don’t know how many people are taking advantage of this opportunity and in what volumes, so maybe it’s not costing Chase enough money to prompt them to make a change.
How to protect your points: There is an easy way to hedge your risk of this potential devaluation, which is to simply transfer all of your Ultimate Rewards to your most valuable card each month when your statements post. So if you have a Sapphire Reserve card, transfer all your points to that account to take advantage of the 1.5 cents per point value. If you don’t have the Reserve card but have one of the several cards which offer 1.25 cents per point, transfer your points that those accounts. That way you won’t ever be caught with points in in a less valuable account if this change is ever made without enough advance warning.
Option 2
This alternative would essentially make the Freedom cards (both regular and Unlimited) pure cash back cards since the points earned could not be combined with those on annual fee cards and transferred to partners or used to book travel at preferential rates. This would reduce the value of the Ultimate Rewards program overall because these cards have some of the best earning rates of all the UR cards with regular Freedom’s rotating 5x categories and Freedom Unlimited’s uncapped 1.5x on all spending.
How to protect your points: The solution here is the same as for option 1; simply proactively transfer your points to your best cards.
Option 3
This alternative would generally make transferring points between accounts useless, essentially making each Ultimate Rewards card its own program. For example, you could earn 1.5 points per dollar on a Freedom Unlimited card and transfer them to a Sapphire Reserve account to take advantage of the higher redemption value, but that would be identical to simply earning the points at 1 point per dollar via unbonused spend on the Sapphire Reserve card in the first place. Transferring points to card with 1.25 cents per dollar redemption would actually result in a loss of value. None of the other transferrable points programs such as Amex Membership rewards or Citi ThankYou points operate in this manner. If Chase implemented this change, Ultimate Rewards would become unattractive relative to their major competitors. As a result, this change is probably not likely any time soon.
How to protect your points: Since this option would apparently result in a loss of value even if points were transferred between two annual fee cards, you may not want to consolidate all points in one card if you don’t plan on holding it long-term. For example, if you don’t plan to keep the $450 annual fee Sapphire Reserve card, then transfer points to one of the $95 annual fee cards instead.
