I'm not sure if you understand downgrading. Downgrading means simply having your card switch to another card that doesn't the annual fee, but that already exists. A Chase Sapphire Preferred coudl be downgrade to a Chase Sapphire, but the Chase Sapphire (non-Preferrred) doesn't have the same exact earning structure as the Preferred as far as I know.

So can't keep using the benefit of the card you downgraded, because downgrading means you get a different card with different (and generally lower) benefits.

And yes, you can only transfer to airlines/hotels if/while you have a "premium" type of UR card. Any one "premium" UR card "unlocks" the ability to transfer your UR Points. While you don't have a "premium" URcard, the ability to transfer UR is "locked out".

A bank doesn't just have limit on how much credit they will issue. They also have a limit of how many actual cards they will issue. Even if you reduce your credit limits to $2,000 each (I don't know if they'd allow them that low on, for example, the business cards, but just assume so for argument's sake for a moment) does not mean the bank will let you have 15 different cards, even though it might let you have two cards of $15,000 credit limit each (which is the same amount of total credit).

So downgrading is not a long-term solution. You can't keep applying for cards and keep downgrading them. You may be able to downgrade the first few cards you get, but it's not something you can keep in the long run, because you'll just have too many useless card which prevent you from easily getting any new cards after that.

Also, the bank may not allow you to have two cards of exactly the same type, but there may be very few choices of what you downgrade to. (For example, it could be -- again this just for example purposes -- that Chase Sapphire Plus can only be downgraded to Chase Sapphire (non-Preferred) or Chase Freedom, but not if you already have those. So once you downgrade one Chase Shapphire Preferred to Chase Sapphire (non-Prefrred), and you already have a Chase Freedom, you may have used up what you downgrade to!)

I don't know if my example specifics are correct, but I do know that the concept they illlustrate does happen.

Meanwhile, how it affects your credit score depends on your overall credit history. For many of us who have long credit history before we started churning, there's no signficant credit score hit to cancelling about at the same rate as we apply.