Why I Cash Out All of My Chase Ultimate Rewards
Chase Ultimate Rewards is a the favorite points currency of many, although that has been changing. Indeed, Ultimate Rewards enable lucrative redemptions. I’ve received outsized value from Ultimate Rewards in the past, primarily in conjunction with my previously-held Chase Sapphire Reserve. However, I now cash out all of my Ultimate Rewards instead of using them for travel.
Prior to continuing, I understand that many, and probably most, of you get more value from Ultimate Rewards by not cashing out. However, cashing out is the best redemption option for my situation. Here’s why!
#1: Limited Partners (For Me)
Chase Ultimate Rewards has an impressive list of transfer partners. However, for my situation, the only worthy partners are Hyatt and, to a lesser extent, Southwest and United. I’m a fan of Hyatt’s quality and consistency, and I’ve found solid value by transferring for redemption. I also describe in another article how I love Southwest. Transferring Ultimate Rewards to top off a United account has come in handy, also. Other than that, however, no other Ultimate Rewards transfer partners or travel redemptions interest me.
To further highlight how limited Ultimate Rewards travel redemptions have become for me, let’s talk about Disney World. I obtained a great Ultimate Rewards redemption for our January 2018 Disney World trip. Via the Chase Ultimate Rewards Cruise and Tours department, I booked our Contemporary Resort stay and all Disney World tickets with Ultimate Rewards. Also, I got 50% more value from the Ultimate Rewards for this redemption by holding the Chase Sapphire Reserve card. However, later in 2018, Chase removed the ability to redeem Ultimate Rewards for Disney World Resort redemptions.
This unwelcome development undoubtedly shook my confidence in the Ultimate Rewards program. I consequently saw no point to continue holding the Chase Sapphire Reserve with its hefty annual fee. Also, I started redeeming Ultimate Rewards for cash back, an option I had not previously or seriously considered. Chase also lost valuable transfer partner Korean Air SKYPASS around this time as well.
#2: Healthy Points and Miles Balances
But wait, didn’t I just say I value Ultimate Rewards transfers to Hyatt, Southwest, and United? Yes, but I have no need to transfer to those partners. Why? Because I have enough of those currencies to meet our travel goals for the next few years. This hobby, thankfully, enables me to easily earn points and miles. At times, so easily that I have the fortunate problem of not redeeming them as quickly as I earn them. This gap between earning and burning can be very wide.
While it is fun watching points and miles numbers pile up in my loyalty accounts, I prefer to use Ultimate Rewards via currencies that can grow (cash). In addition to using the cash back to travel exactly the way I want, I also would rather use the cash for bank account bonus activities, interest-bearing accounts, or investing. For me, leaving the Ultimate Rewards in my Chase account would devalue the points in comparison to some of the activities I would use the cash for. Remember that points almost exclusively lose value where cash gives you the opportunity to increase its value.
For those of you who don’t cash out but want to mitigate against point devaluation, I recommend keeping your Ultimate Rewards in your Chase account until you are immediately ready to redeem with a transfer partner. Ultimate Rewards have been consistently guaranteed at one cent each by Chase (cashing them out), while transfer partners periodically devalue their points currencies.
#3: Avoiding Annual Fees
By cashing out all Ultimate Rewards, I quickly cut my annual fees on Chase “point” cards to zero. I product changed my Chase Sapphire Reserve to a Chase Freedom. I downgraded my Chase Ink Preferred to a Chase Ink Cash. By not caring about transfer partners, which is a primary value of many Chase cards, I quickly cut my costs. My only remaining Chase annual fee is $49 for Chase’s legacy IHG card, which I rationalize keeping for the annual free night certificate.
Before making the above product changes, I considered the reality of not having the quick ability to transfer points to partners. However, knowing I could easily upgrade one of my multiple Chase Freedom accounts to a Sapphire for transfers, I confidently made the changes to no annual fee cards.
Of course, annual fees for the Sapphire Reserve and Preferred are justifiable depending on your redemption strategy. The savings from one transfer partner redemption or Chase travel portal booking can easily exceed the card’s annual fee. However, if you use the Chase travel portal to book, ensure the rate is equal to or better than what you could obtain from a cash booking. Referral bonuses from either of these cards can also outweigh the annual fee.
#4: Excellent Cash Back Rates
I can earn five (insert your favorite Ultimate Rewards partner here) points per dollar? Why would I want cash back? In the past, I’ve focused on the outsized value I can get from Chase Ultimate Rewards, while conveniently ignoring the undeniably substantial cash back value right in front of me.
Which Chase Cards I Use
I focus all of my Chase spending on two card products: Chase Freedom and Chase Ink Cash. I earn 5% cash back on all Chase spend, since I only use these cards in the specific bonus categories. By holding multiple accounts for each of these Chase card products, I can earn a not insignificant amount of cash back.
Increasing 5% Cash Back Access
You can easily enable this multiple card account option for yourself by product changing cards as I described above. These product change benefits are two-fold: in addition to zeroing out the annual fee, you obtain more ability to earn 5% cash back. For example, I previously held one Chase Ink Preferred account and one Chase Ink Cash account. By simply downgrading my Chase Ink Preferred to a second Chase Ink Cash account, I increased my access to 5% cash back earning from $25,000 to $50,000 spend per year while avoiding the Preferred’s $95 annual fee. Similarly, by downgrading Chase Sapphire Preferred or Reserve to a Chase Freedom, you increase your 5% cash back earn rates by $6,000 annual spend each time.
One More Product Change
Also, by deciding to only care about cash back with Chase, my Chase Freedom Unlimited card became useless. I can earn 2.5% cash back on my American Express Blue Business Plus card (when paired with the Charles Schwab Platinum), and 2% cash back on my Citi® Double Cash Card cards (1% cash back when you buy, plus an additional 1% as you pay for those purchases), so 1.5% cash back from the Chase Freedom Unlimited wasn’t worth considering any longer. So, while the Chase Freedom Unlimited has no annual fee, I easily decided to product change this account to yet another Chase Freedom account.
#5: Improving Travel Freedom
I’ve previously described how I prioritize travel freedom over brand loyalty. While Ultimate Rewards are a very flexible point currency, it’s not as flexible as cash. By redeeming for cash back rather than a partner currency or Chase travel portal redemption, I am freeing myself from that currency/portal limitations and taking more control over how I travel. Consequently, I use that cash back redeemed from my Chase cards to travel exactly the way I want and maximize the discounts I can obtain while earning rewards with the selected travel entity (and portal bonuses, etc).
Chase Ultimate Rewards Cash Out – Final Thoughts
When I decided to start cashing out all Chase Ultimate Rewards, it was an easy, empowering choice in my situation. I realize this is not the optimal move for many travelers for lots of reasons. If you have a massive pile of points that are continually being devalued, maybe a change to cash back is a good move for you, too. I encourage you to evaluate your spend and redemption habits to determine how to most effectively meet your travel goals, whether it be via travel rewards or cash back redemptions.
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[…] and miles space that have some similar thoughts about points and moves toward cash. Mark and Benji at M2M have some recent posts that are worth […]
can u downgrade Chase Ink Preferred to Chase Ink cash on line or on the phone ????
I product changed over the phone.
In the proper term do use is downgrade
Did you use the number on the back of the card to call
You can use whichever term you prefer – downgrade or product change. I can’t recall which number I used, but the number on the back of the card should be fine.
Very interesting post. Currently have both an Ink Business Cash and an Ink Business Preferred for my small business. Do you think they would allow me to product change the Ink Business Preferred for an Ink Business Cash that would make two Business Cash cards for the same business? It would suit my spending needs better, but I never thought to try for it until I read your post. Thanks.
Steve,
Yes! This is exactly what I did, without any problems. I’m glad two Ink Cash accounts will work better for you. Thanks for reading!
Very interesting post and comments, thank you.
Barbara,
Thanks for reading!
UR cash redemption is taxable when it exceeds $599/annually. You high rollers will see a big tax bite diminishing the redeemed cash value when exceeding that amount. You will receive a 1099.
Only referral bonuses get 1099’s. Points are considered a rebate on spend and are not taxable.
Any tips on product changing the Freedom Unlimited to the regular Freedom?
Brad,
I have no specific tips for your call. It was pretty simple in my experience PC’ing from Freedom Unlimited to Freedom. You shouldn’t have any problem PC’ing.
Any clue if you can do it via chat or a secure message? I hate taking to them on the phone!!
Should be able to do it on SM
Brad,
What Mark said. Also, for what it’s worth, I called and it worked fine.
Can you still use the Chase Travel portal if you don’t have “premium” card?
Hilde,
Yes, you have access to the Chase travel portal without a Sapphire card and can book with points at a 1 cent per point rate. However, you are not able to transfer to air and hotel partners.
Benjy,
Thanks for the writeup. I was actually considering doing this even though my points in other program is low. My reason is due to historically low stocks due to recent events, I would’ve put the cash into various funds to ensure better retirement. I feel I can always restock UR but the bear market’s pretty rare.
Bob,
Great point. While I wouldn’t cite a bear market as a normal reason to cash out (as that is unpredictable), it makes sense to ride the wave while you can!
Really interesting article, my initial gut reaction was no way, Chase points have given me great value. However, there are so many rules and restrictions on finding availability with partners, driving home the point that cash is king. Going to have to seriously reconsider my credit card strategy going forward. Thanks for this thought-provoking post.
Jace,
Thanks for reading!
After trying to get through to Amex travel services this weekend (impossible), I considered switching to cash back as well. Cash is really cool, you can use it not just for travel on certain dates, but anything at all! Even your mortgage.
Steven,
I totally agree! Even if you don’t necessarily take the cash back route at a given point, it’s always good to know you have this alternative at your convenience.
Benjy, I am thinking of cashing out my UR points for a different reason. After the coronavirus pandemic is over, airlines and by extension potentially the Chase travel portal, may decide to increase prices, i.e. a significant devaluation of the UR points. While my Sapphire reserve currently gives me the 50% “bump“, hoarding points puts me at risk of a significant devaluation, perhaps with the bump slashed down significantly over this next year, perhaps to 0% (no “bump”). Any thoughts on how likely Chase might be to take such action, especially if the airlines have decided to jack up their prices to make up for the current year’s losses? Thanks!
Maria,
Thanks for chiming in! I think it’s great that you are periodically reviewing whether you are getting enough value out of the Reserve card. My gut feeling is Chase wouldn’t devalue the Reserve’s 50% “bump” without notice, especially with how they recently raised the card’s annual fee.
While it’s kind if true “points almost elusively lose value” I wonder if you meant “exclusively”? Maybe not.
I cashed out my US Bank FlexPerks points some time back. I may do the same for UR, but I am more likely to hold for possible Hyatt transfer. If Hyatt was not an option (or if I had a lot of Hyatt points already) I would do the cash route. I am currently working on initial Sapphire 60K bonus.
Carl WV,
Type-o fixed. It’s always good to have a contingency plan if your favorite Ultimate Rewards partner(s) disappear. It sounds like you are all set! Thanks for reading.
Benjy I applaud you for being willing to offer up your thoughts that go against the grain. Well I am not in that place (earn and burn rate is about equal) I can see where you are coming from.
I also think if anyone out there mainly travels domestically that cash back probably makes sense over collecting airline miles etc. The cash value of UR points is one of the reasons that I hoard them more than I should. They are kind of like an emergency fund should I need cash in a pinch. I would tell people to keep them as UR unless you have a need for the cash or an investment for the money etc. But if you are sitting on a mountain of airline miles and hotel points already then routinely cashing them out can make sense too.
We rarely look at Chase cards as a cash back vehicle but if that is what you are focused on they are some of the best in the biz too.
I’ve been thinking the same thing, for many of the same reasons. I did not renew my Chase Sapphire Reserve, and so now I only have no-annual-fee UR cards, and I can’t really justify paying an annual fee for the higher redemption value on Chase’s travel portal. With all kinds of travel taking a big hit over the coming months, I’m going to wait and see a bit, maybe redeem half of my roughly 500K UR points.
I think more and more people will consider this as points values deteriorate or their earning outweighs their burning.
02nz,
I can understand your perspective! A great hedge is cashing out some, but not all, Ultimate Rewards.
Have to say I cannot make any sense of this article. We live out of state and we are Disney annual pass holders. We travel to and from Disney exclusively with Chase UR. Covers 100% of our lodging, airfare, and car rentals. Yes you cannot directly book disney monorail resorts. You can however book many other properties within Disney complex and hundreds just outside the gates. Many of these have 60 day fastpass options, EMHs, and Disney transportation benefits. There are terrific options to be had. My oldest is 5years old and she has had 7 Disney trips we never would have had without Chase UR.
Dan,
We prefer Disney World Resorts, so this is why I don’t consider Ultimate Rewards to be an option for us. Kudos to you for getting value from Ultimate Rewards for off-property stays!
I would also say losing the opportunity to purchase tickets and then roll them into annual passes was a big hit for UR points among Disney lovers.
I understand where you’re coming from. But I consider the Swan, Dolphin, Hilton Bonnet Creek, JW Marriott and others under the disney “gates” to be on property since many of these are closer to the parks than other official Disney owned properties. I dont see anything different other than the ownership. Same perks, firework room views, character breakfasts, etc. Just my opinion of course!
Dan,
I get it. We have enjoyed the Waldorf Astoria and Hilton Bonnet Creek properties on non-Disney visits. I’m glad those Marriott properties worked out, as well. You won’t see me at a Marriott property, though – I’ll save that for a different article.