This past August, the Chase Sapphire Reserve caused quite the buzz due to the 100,000 point sign-up bonus. Besides this amazing bonus worth $1,500 on travel booked through Chase, the Chase Sapphire Reserve offers perks such as Priority Pass Lounge access, Global Entry fee reimbursement, and a $300 annual travel credit.
Chase Sapphire Reserve Pays for Itself in the First Year
For those of us who got the card this fall, the annual fee more than pays for itself because of this travel credit. The $300 travel credit will post in 2016 and again in 2017. This happens before the annual fee is due for a second time so you actually gain an additional $150 towards travel just by getting this card. Since the travel credit works on a variety of travel-related purchases, it is not hard to use it if you aren’t planning any vacations.
From Chase’s Reward Categories FAQs:
Merchants in the travel category include airlines, hotels, motels, timeshares, campgrounds, car rental agencies, cruise lines, travel agencies, discount travel sites, and operators of passenger trains, buses, taxis, limousines, ferries, toll bridges and highways, and parking lots and garages.
But What Do I Do with My Chase Sapphire Preferred?
However, if you also have the Chase Sapphire Preferred, you’ll find yourself asking “Do I really need two metal credit cards from Chase?” It doesn’t make sense to pay annual fees on both credit cards, but which one should you keep?
If you subtract the travel credit, the annual fee for the Chase Sapphire Reserve is essentially $150. Compared to the $95 fee for the Chase Sapphire Preferred, you will have to determine if it is worth spending the extra $55 in fees to keep the Chase Sapphire Reserve over the Chase Sapphire Preferred.
Calculating Which Card You Should Keep
What it comes down to is how much you spend in the two categories that offer more than one Chase Ultimate Reward point per dollar spent. Chase Sapphire Preferred offers 2x points on travel and restaurants while Chase Sapphire Reserve offers 3x points for these categories. I’ve found that both the travel and dining categories are pretty liberal.
You can calculate which card provides more benefit. For these calculations, we will use the valuation of Chase Ultimate Rewards points when redeemed for travel through Chase. Points are worth 1.25 cents for Chase Sapphire Preferred and 1.5 cents for Chase Sapphire Reserve.
In the most simplistic example, to break even on the $95 fee for Chase Sapphire Preferred, you would need to spend $3,800 on restaurants and travel.
9,500 Chase Ultimate Rewards points = $95 (annual fee)
Since points are worth 1.25 more with Chase Sapphire Preferred, you would only actually need 7,600 points.
7,600 points x 1.25 bonus = 9,500 points
To get 7,600 points, you could spend $3,800 on restaurants and travel which earns 2 points per dollar spent.
$3,800 x 2 = 7,600 points
For Chase Sapphire Reserve, the break-even point to cover the annual fee is about $3,333 spent on restaurants and travel.
15,000 Chase Ultimate Rewards points = $150 ($450 annual fee – $300 travel credit)
Since points are worth 1.5 more with Chase Sapphire Reserve, you would actually only need 10,000 points.
10,000 points x 1.5 bonus = 15,000 points
To get 15,000 points, you could spend $3,333 on restaurants and travel which earns 3 points per dollar spent.
$3,333.33 x 3 = ~10,000 points
In this example, you actually have to spend less than you would with Chase Sapphire Preferred to make up the larger fee for Chase Sapphire Reserve.
Of course, not all of your spending will be in these two categories. If you spend less on travel and restaurants, it will be harder to cover the fee.
In this next example, let’s say you spend $1,500 on travel and restaurants in a year. We will determine how much money you would need to spend on everything else (at a rate of 1 point per dollar spent) to break even.
$1,500 on restaurants and travel with Chase Sapphire Preferred will earn you 3,000 Chase Ultimate Rewards points. Multiplying this by 1.25 for spending the points on the Chase travel portal, you get 3,750 which is worth $37.50.
To cover the $95 fee, you need 9,500 Chase Ultimate Rewards points. Subtracting 3,750 from 9,500 shows that you still need 5,750 points. Since you only get 1 point per dollar, you would have to spend $5,750 to earn 5,750 points.
This brings total spending to $7,250 to cover the fee for Chase Sapphire Preferred.
$1,500 on restaurants and travel with Chase Sapphire Reserve will earn you 4,500 Chase Ultimate Rewards points. Multiplying this by 1.5 for spending the points on the Chase travel portal, you get 6,750 which is worth $67.50.
To cover the $150 fee, you need 15,000 Chase Ultimate Rewards points. Subtracting 6,750 from 15,000 shows that you still need 8,250 points. Since you only get 1 point per dollar, you would have to spend $8,250 to earn 8,250 points.
This brings total spending to $9,750 to cover the fee for Chase Sapphire Reserve.
In this example, it may make sense to keep the Chase Sapphire Preferred depending on how much you spend in a year.
If you were to ignore the point bonus for restaurants and travel, but still consider the extra value from redeeming points for travel through Chase, you would need to spend $7,600 per year to cover the fee for Chase Sapphire Preferred.
9,500 points / 1.25 bonus = 7,600 points
For Chase Sapphire Reserve, you would need to spend $10,000 per year.
15,000 points / 1.5 bonus =10,000 points
Before your annual fee is due, review your spending from the past year to see if you spend enough on travel and restaurants to make the Chase Sapphire Reserve worth your while.
Factoring in Other Benefits
These calculations only consider the restaurant and travel point bonuses and the extra value from redeeming for travel through Chase. Since the difference in fees is only $55, you should also consider the other benefits that the cards offer. The two big pros of Chase Sapphire Reserve are the Priority Pass Select membership and reimbursement for Global Entry or TSA Precheck. However, you may have never utilized these programs if you didn’t have the Chase Sapphire Reserve. You may be fine never setting foot in an airport lounge, but Priority Pass allows free entry at lounges that can cost $40 or more per person. Global Entry is worth $100 and TSA Precheck is worth $85. Again, you may have never signed up for either if you didn’t have this credit card. You will have to decide how these perks weigh into your decision to keep the Chase Sapphire Reserve.
Chase Sapphire Reserve and Preferred offer varying degrees of travel and purchase protection. These are benefits you hope you never have to use, but could be of great value if you find yourself in a scenario covered by these types of insurance. A highlight of these benefits include:
- Auto collision damage waiver covers up to $75,000 for theft and collision damage on rental cars including exotic cars for Chase Sapphire Reserve. Chase Sapphire Preferred covers up to the actual cash value of the car and excludes certain cars.
- Trip Delay Reimbursement covers expenses like meals and lodging up to $500 per ticket if your travel is delayed more than 6 hours with Chase Sapphire Reserve. This kicks in after 12 hours with Chase Sapphire Preferred.
- Travel Accident Insurance covers up to $1,000,000 for accidental death or dismemberment if you pay for air, bus, train, or cruise transportation with your Chase Sapphire Reserve. Coverage is up to $500,000 with Chase Sapphire Preferred.
- Emergency Medical and Dental covers up to $2,500 for medical expenses if you or your family member becomes sick while 100 or more miles away from home with Chase Sapphire Reserve. There is no coverage with Chase Sapphire Preferred.
- Purchase Protection covers purchases for 120 days against theft or damage up to $10,000 per claim and $50,000 per year with Chase Sapphire Reserve. With Chase Sapphire Preferred, each claim can only be up to $500.
While you can calculate the break even point of each card, there is a bit of a judgment call in deciding if you should keep your Chase Sapphire Preferred or Chase Sapphire Reserve. If you recently opened both, make sure to transfer your bonus from your Preferred to your Reserve account to get a better redemption value on the Chase Ultimate Rewards portal. Whatever your decision, you may prefer to downgrade the other card to a no annual fee alternative such as Chase Freedom or Chase Freedom Unlimited.