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Chase just launched a top-tier travel credit card to compete with American Express (Platinum) and Citi (Prestige) in the form of the Chase Sapphire Reserve. Is it worth the hefty $450 annual fee though? If you already have the Chase Sapphire Preferred, is it worth upgrading to it?
The cards have all the benefits you would expect like trip cancellation and delay coverage, primary rental car insurance, lost luggage reimbursement, and more. Beyond these typical benefits, there are the Reserve has unique perks in that it provides you with a hefty initial sign up bonus, 3x points on travel and dining, $300 travel credit, and $100 global entry credit.
Let’s take a deeper dive into each of these items…
Sign up bonus
If you sign up for a new card and spend $4,000 in the first 3 months, you’ll receive 100,000 Ultimate Reward (UR) points. Depending on how you redeem the points, the value of these points can range from $1,000 to $2,100.
If you chose to redeem the UR points for cash, you’ll get 1 cents per point (CPP), meaning that 100,000 UR points turns into $1,000. This is useful if you’re worried about paying off the annual fee or need the money for other expenses.
If you chose to redeem the UR points for travel on Chase’s portal, you’ll get 1.5 CPP. This means that your sign up bonus is worth $1,500 in travel. This includes flights, hotels, cruises, and vacation packages. The cost on Chase’s portal are comparable to other deal sites from my experience.
The Reserve also lets you transfer your points on a 1 to 1 basis to their transfer partners. This method typically yields you 2.1 CPP, meaning that you’re getting $2,100 in travel. For an example, we’ll look at United’s award travel planning chart.
A roundtrip flight from the United States to Australia will cost you 80,000 UR points (with 20,000 to spare from your sign up bonus!):
If you were to buy the same flight with cash from United, you’re looking at about $1,600.
Even if you play with the dates, prices are about the same (and extremely expensive in January apparently).
The sign up bonus, regardless of how you use it, is a big reason why you should get the Chase Sapphire Reserve.
3x on travel and dining
For normal transactions, you get 1x the points. If you spend $100, you’ll get 100 points.
For transactions that code as travel or dining, you’ll get 3x the points. Again, depending on how you value your points, this means that you’re getting 3% to 6.2% back from your travel and dining transactions.
The only cards that give you a similar cashback are the Chase Freedom which gives 5% cash back to specific categories, depending on the quarter, the Discover It which has a similar 5% bonus system (which doubles to 10% in your first year!), and the Citi Prestige (one of it’s main competitors for premium travel credit card).
$300 travel credit
Chase will automatically refund you for transactions that code as travel, up to $300 per calendar year.
This is interesting since there’s the potential to get this benefit twice in your first year (once from now until Dec 31, 2016, and once from Jan 1, 2017 until your card renews or you cancel).
If you decide that this card doesn’t make sense in year 2 and beyond, you can simply do a product change to a no annual fee card like the Freedom. The benefit of a product change over cancelling the card outright is that it won’t negatively affect your credit score which looks at the average age of your accounts.
$100 Global Entry credit
The Reserve provides you with a $100 credit to cover your Global Entry costs every 4 years. Depending on if you value Global Entry, this can easily save you $100.
IS IT WORTH IT?
As long as you can take advantage of the sign up bonus (again, $4,000 of spend in the first 3 months) and the $300 travel credit (remember, Uber and Lyft count), it’s well worth it.
If you’re curious if it’s worth it for your specific situation, you can go here and modify the green cells.
For myself, the net value of the card is $2,901. That means that I’m getting $3,351 in value from the card while paying “only” a $450 fee.
I’ll definitely make sure I get the sign up bonus, even if that involves buying gift cards to Trader Joe’s and Amazon for the rest of the year. In total, I spend about $10,000 on food and travel. I’ll likely put about $1,000 in spend that’s not under the 3x category (I typically use other cards that do have bonuses for other spend). I’m a travel nerd so I’ll likely transfer the UR points to Chase’s partners. Similarly, I’ll likely spend the $300 required for 2016 and 2017. I’m not overly concerned about Global Entry.
In year 2, the card has a net value of $501 with the same variables.
Frugal Frank is saving for a house and isn’t looking to spend if it’s not necessary. He’ll hit get the sign up bonus by spending about $2,000 on travel and $2,000 on other expenses. He’s going to redeem the UR points for cash and will make sure he spends the $300 travel credit for 2016 and 2017. He doesn’t travel often but he wants to maximize the value he gets so he’ll take advantage of Global Entry.
In Year 1, Frank has a net value of $1,330 from the card. In Year 2, his net value is -$70. Given this, it makes sense for him to get the card for a year and do a product change to something like the Chase Freedom in Year 2.
Norman’s your typical guy. He spends about $10,000 a year on travel and dining and will put another $10,000 of other spend on the card. He’ll redeem the UR points for the 50% discount with Chase’s travel portal, and Global Entry sounds cool.
In Year 1, the net value of the card is $2,350 while in Year 2, it’s $450. It’s a keeper card for him as long as he puts spend on it.
Tracy is a globe trotter, and she’s a credit card wiz. She puts $20,000 in spend from travel and dining and doesn’t “waste” any non-travel or dining spend on the Reserve. She loves playing around with travel partners and already has Global Entry from one of her other credit cards.
In Year 1, the net value of the Reserve is $3,510. In Year 2, it’s $1,110.
WHEN IT DOESN’T MAKE SENSE
If you’re looking to carry a balance, I would suggest that you look into other credit products that have low interest rates. This is a card where you should NOT keep a balance on month to month.
Similarly, if you can’t meet the $4,000 spend requirement for the first 3 months, this card probably doesn’t make sense. Remember, you can buy gift cards if necessary!
If you can’t take advantage of the $300 travel credit (again, it automatically applies to things like flights and even Uber rides), it doesn’t make sense to keep this card.
RESERVE YOUR CRITICISMS
A lot of people are going to look at this credit card and dismiss it because of it’s high annual fee. In reality, it can easily provide $1,000 in net value without much effort.
Reserve your criticisms — the card may be a free ticket to your next vacation.