2020 came with a big surprise for those in the credit card points and miles community.
One of the most popular premium travel cards made some significant changes, prompting some
extremely strong reactions across the internet.
Hey, how’s it going everyone?
It’s Ernest from Trip Astute.
In this video, we’re going to dive into the changes on the Chase Sapphire Reserve
card, and how you can determine whether it’s still the right card for you.
I’ll also share how you can do the same calculations using a free tool that we’ve
created.
As many of you know, the Chase Sapphire Reserve is one of my favorite credit cards.
I got the card in 2016 when it was first launched, and it’s offered a lot of value to me over
the past few years.
In fact, I even voted for it as my pick when we did the collaboration last year on what
would be our “one card”.
That was one of my favorite videos of 2019, so if you missed it, make sure to check it
out.
The Sapphire Reserve has been the core of my Chase Ultimate Rewards set-up, and I imagine
to many of you as well, so these changes are significant.
I know there are a lot of people online already saying that the “world is ending” now
that these changes are coming.
However, this is the nature of the points and miles hobby.
Things change all the time, and it means that we must always adapt and reevaluate whether
we are getting value from our cards and programs.
It’s easy to have an emotional reaction to the change, but I think it’s worth taking
a step back and objectively evaluating the impact.
In this video, I want to cover a few things.
One is a quick recap of the changes.
I know that most of the creators in this space are covering this topic, so I don’t want
to spend too much time discussing the details of each change.
Instead, I want to share my thoughts on the changes, and specifically, how I calculate
the estimated value of the Sapphire Reserve.
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So let’s quickly review the changes with the Chase Sapphire Reserve.
The big one is obviously the increase in annual fee from $450 to $550.
This puts it on par with the American Express Platinum which also has a $550 annual fee.
This isn’t too surprising to me since Chase has reported a loss with the card, and it
seems like they’ve been trying to steer customers toward the Sapphire Preferred for
a while with the higher welcome offer.
The card was surprisingly popular when it was first released.
I remember Chase even running out of metal cards since they were flooded with applications.
The other set of changes are in the form of credits and benefits.
This is where a lot of people seem to have gripes.
It’s understandable, as they seem to be targeted toward a very focused customer segment,
specifically those that live in larger metropolitan cities and that utilize ride-sharing and food
delivery services.
The first new benefit is a $60 DoorDash credit per year for the next two years.
This credit is not capped or allocated per month like the dining credits from American
Express.
Much like the $300 travel credit, you’ll get statement credits as you use it.
The second new included benefit is the DashPass membership.
This is worth about $10 per month and basically waives your ordering and delivery fees when
using DoorDash.
The third new included benefit is the Lyft Pink membership.
This is worth about $20 per month and gives you several perks including 15% of all Lyft
rides, three free cancellations per month, three free bike or scooter rentals per month,
priority airport pickups, waived lost and found fees, and access to special offers.
Lastly, you’ll now earn 10X points on Lyft rides, which is a significant improvement
from the 3X that you used to earn as part of the travel bonus category.
Ok, so what do I think about the changes?
To be honest, I was initially disappointed by the annual fee increase.
I wasn’t convinced that I would get value from the new benefits, so I was skeptical
of the changes.
However, after evaluating my numbers, I think my initial emotional reaction may have been
off.
Obviously, everyone’s situation and lifestyle is unique.
However, it got me thinking that others are probably wondering whether the Sapphire Reserve
is still worth keeping.
I thought it might be useful to review how I am evaluating the value proposition.
If anything, I hope this gives you a structured approach to determining how much you are either
gaining or losing with the changes.
Before I share how to evaluate whether the card still works for you, I want to review
some quick terminology and assumptions.
First off, I am breaking out the benefits into two categories.
One is the fixed benefits.
This includes the $300 annual travel credit and the new $60 DoorDash credit.
For the sake of simplicity, these are “use it or lose it” type of benefits.
The other benefits are what I am classifying as variable benefits.
This includes the Priority Pass, Lyft Pink, and DashPass memberships.
These are services that are included as part of your annual fee, but the value that you’ll
gain from them is dependent on how much you use it.
Lastly, this method doesn’t account for other cards that might in your wallet that
have similar benefits or bonus categories.
For example, you might have another card or card set-up that rewards you for dining out,
like the American Express Gold.
This process also doesn’t account for other discounts or promotions that you might have
access to which would affect the value of these new Sapphire Reserve benefits.
However, when I compare my scorecard at the end of the video, I will compare it to what
I would earn if I had the Sapphire Preferred instead.
Ok, let’s jump into the seven steps to evaluate whether you are still getting value from the
Sapphire Reserve.
1.
Examining your fixed credit benefits: Since these are “use or lose”, it’s important
to evaluate whether you’ll take advantage of them.
The $300 annual travel credit has traditionally been an easy credit to redeem.
This is especially true since Chase has a very broad definition of what constitutes
a travel expense.
Even expenses like parking are considered to be travel.
For most people, this is a guaranteed $300 back.
This is why you’ll often see me refer to the Sapphire Reserve’s adjusted annual fee
as $150 under the old annual fee, and now $250 under the new annual fee.
The other fixed benefit is a bit more tricky.
It depends on your usage.
We tend to order food at least twice a month, usually on a Friday night after Fiona and
I have had a long work week.
Our normal routine is to order directly from our favorite Thai restaurant down the street.
I usually use ChowNow since it’s linked to the restaurant website.
However, when I checked on DoorDash, it looks like they have the exact same menu and prices.
So for us, this works great!
If you never order out or live in a place where DoorDash does serve your market, then
your mileage may vary.
Though if you travel for work or even find yourself ordering room service, you might
consider using a service like DoorDash instead.
I know that the prices of these delivery services can sometimes vary, so you’ll want to make
sure that you’re not overpaying for the food too.
But getting back to the fixed credits, I am confident that I’ll be able to take full
advantage of them.
2.
Consider your Lyft usage: I didn’t think that I used ridesharing that often.
However, when I pulled my data from YNAB, I found that I spent about $500 last year
on Uber and Lyft rides.
When I factor that most were for rides while traveling abroad, where Uber is the only option
since Lyft is unavailable, it was closer to $300 for rides in the US.
Most were for airport rides, which average around $40 to $50 from my apartment to LAX.
So for me, I estimate that the Lyft Pink membership is probably worth around $45 per year for
me.
Again, the more you spend on Lyft, the more you’ll save.
I’m also not accounting for the fact that you’ll earn points toward Delta or Hilton
as well through Lyft, which may also be part of your value calculation.
The other thing to consider is that you’ll now earn 10X points on Lyft rides.
So for me, that’s 2,100 points, which is worth at least $31.50 assuming a minimum redemption
rate of 1.5 cents on the Chase Travel Portal.
In case you’re wondering, I am multiplying by seven instead of ten since I want to avoid
double counting the spend when I look at my total travel and dining expenses later in
step 5.
Also, it’s worth noting that the Sapphire Preferred now earns 5X points on Lyft rides,
which means that it’s been adjusted to 3X in my calculations to avoid double counting
as well.
So, just on my ridesharing usage, I value the Lyft benefits to be around $77 per year
for me.
I know that Lyft Pink membership also includes other perks, but I haven’t had a chance
to try it and determine whether I find them to be valuable.
3.
Consider your DashPass savings: DashPass can save you delivery and order fees.
The service claims that it’s about $4 to $5 per order.
However, using my Thai restaurant example, it’s closer to $2 for me.
Even then, if we order twice a month, then we are saving about $48 per year.
You can see from the chart that if you order even more, then the savings can be significant,
even when I am using a conservative $2 delivery fee estimate.
Though if you’re someone who doesn’t get charged a delivery fee or prefers to pick-up
your order, that may influence your savings as well.
Also, it’s always important to check the price when using DoorDash versus ordering
directly from the restaurant or using another delivery service.
In my case, it’s the same, but I know it can vary.
4.
Determine your Priority Pass usage: This is another major benefit on the Sapphire Reserve
that’s tough to quantify.
I know some people have complained that Priority Pass lounges are crowded and therefore less
valuable than other lounge programs like the American Express Centurion lounges accessible
with the American Express Platinum.
However, from personal experience, I can say that we’ve managed to get a lot of value
from our Priority Pass lounge membership.
Based on our usage, I’m estimating that the lounge access is worth $60 for us.
I came up with this estimate since we made four visits to the lounge this year.
Two visits were on my own and two were with Fiona as my guest.
For the lounge visits, I estimated that each visit was worth $10 per person in food and
drinks, which means that we saved about $60 with the lounge visits.
We also used the Priority Pass restaurant credit this past year.
For the restaurant credits, I’ve outlined the party size, total credit, and the actual
amount used.
I then discounted it by 20% since gratuity is separate and not covered by the restaurant
credit.
Now the complication comes with determining whether we would have actually purchased anything
at the airport or not if we didn’t have access to this benefit.
Perhaps we would have had a meal at home before heading to the airport, or maybe waiting for
the airline meal service.
That makes this hard to estimate.
So, to be fair, I decided to account for only 50% of the value, which is how I came up with
$80 as my estimated value for the Priority Pass membership.
I might be too conservative with my calculation, but $80 for basic food and drinks for the
year seems about right to me.
5.
Examine your travel and dining expenses: This is another variable benefit that is purely
based on how much you spend in a year.
Previously, the breakeven point for strictly travel and dining bonus purchases was $3800
for the Sapphire Preferred and $3333 for the Sapphire Reserve.
That was using the Chase Travel Portal redemption rate, which is generally the minimum rate
that you would want to redeem your points.
Also, I factored in the annual fee.
For the Sapphire Reserve, I’m using an adjusted annual fee of $150 instead of the old annual
fee of $450 since I’m factoring in the automatic $300 travel credit.
With the new annual fee, the equation dramatically changes for the Sapphire Reserve.
You now would have to spend $5556 to break even with an adjusted annual fee of $250.
This is assuming that you’re not factoring in the value of the other benefits, including
the $60 DoorDash credit.
When I checked my travel and dining costs for 2019 in YNAB, it came out to around $12,000.
A lot of that went on my American Express Gold card.
But since I’ve canceled my American Express Gold card, dining charges are back on my Sapphire
Reserve this year.
I also have to adjust for the fact that we went on a honeymoon last year, which accounted
for about half of that $12,000.
So, for the sake of this exercise, I’ll estimate a total dining out and travel cost
of $6,000 per year.
Ignoring the annual fee for now since we’ll tally it at the end of the scorecard, I’m
looking at an earned value of $270 for $6000 of spend based on the 1.5 cent redemption
rate.
6.
Determine how much you use other travel benefits: This one is also hard to quantify since you
hope to never use these benefits.
It’s more peace of mind than anything.
However, for me personally, I find that I do get savings from one of them, which is
the primary rental car insurance
The catch with the primary rental car insurance is that it’s not unique to the Chase Sapphire
Reserve.
The Sapphire Preferred, Ink Business Preferred, and other Chase cards have this benefit, so
it might not be something that you even consider.
However, when I checked my records, we rented a car for 25 days last year.
That’s mostly because of your honeymoon road trip.
Though if I estimate that the savings were $20 per day for declining the extra insurance
provided by the rental car companies, the potential savings is $500.
Again, I don’t think I normally rent a car for that many days a year.
In fact, when I looked at 2018, I only booked 7 days of rental cars.
So, to better estimate the value this year, we’re looking at about $140 of savings by
opting out of the insurance offered by the rental car companies.
And finally, 7.
Consider your Chase Travel Portal usage: This is another one that’s tough to gauge since
it’s hard to predict how you might use your points.
For example, if you’re someone who generally uses your points for Hyatt, you might be more
inclined to transfer points directly to a travel partner rather than using the Chase
Travel Portal.
Having the Sapphire Reserve doesn’t give you an advantage over the Sapphire Preferred
when it comes to transferring points to travel partners.
However, if you frequently use your points on the Chase Travel Portal, then you are benefiting
from the additional per point value.
Just for review, the Chase Travel Portal redemption rate for the Sapphire Reserve is 1.5 cents
and for the Sapphire Preferred is 1.25 cents.
For example, if you already have 50,000 Chase Ultimate Rewards points in your account that
you plan to use, but you product change from the Sapphire Reserve to the Preferred card,
then you’re devaluing your points by $125 if you wanted to use them on the travel portal.
Again, the difference is more significant if your points total is larger.
But this is really dependent on how much you anticipate using the Chase Travel Portal for
your travel bookings.
I’m not including this figure in the scorecard because I’m already accounting for the redemption
value when calculating the total travel and dining spend.
However, it is something to keep in mind if you already have a lot of points that you
intend to use on the Chase Travel Portal, as you may be devaluing your points if you
downgrade your Sapphire Reserve to the Sapphire Preferred card.
If I tally up all the potential savings from these calculations, you can see that I actually
come out ahead, even with the annual fee change.
I even compared it to the Sapphire Preferred using the same figures but adjusted for the
card’s annual fee and reduced travel portal earning rate to see how it stacks up with
my usage.
Based on my value calculation, I’m still better off with the Sapphire Reserve over
the Sapphire Preferred based on my spending pattern and lifestyle.
Again, this is just my experience.
We live in Los Angeles and use both ride-sharing and food delivery services, and we travel
a fair amount, so the Sapphire Reserve still makes sense for us.
Though your situation might be completely different, which is why I encourage you to
go through this exercise to gauge how much you think you’ll gain or lose from the new
benefits and annual fee.
I’m hoping this video gives you some structure on how you might determine the value of these
benefits.
I know that I was surprised since I didn’t think I used ride-sharing services that often,
but when I looked at my numbers, even a few rides to and from the airport means that I
save more than I expected.
But again, you might have other credit cards that take away from your dining and travel
spending on the Sapphire Reserve, or even have cards that offer similar benefits.
In those cases, your numbers could be dramatically different.
In case you want a closer look at the diagrams used in this video, I’ve posted them on
my website.
I’ve been trying to put all the diagrams from my videos in the website posts since
I know it’s a pain having to find them in the video and freeze the frame if you’re
trying to use them as a reference.
And even better, I’ve created a Google Sheet that you can use to follow the same methodology
and calculate your estimated value.
The spreadsheet will give you a lot more precision too since it allows you to adjust the assumptions
in the worksheet.
All you have to do is follow the tabs at the bottom of the spreadsheet and it will generate
your scorecard at the end comparing the value between the Sapphire Reserve and Preferred
card.
I’ve posted a link to the spreadsheet in the video description and on our website.
It should be fairly straightforward, but if you have any questions, don’t hesitate to
ask.
What do you think about the Sapphire Reserve changes?
I’m curious whether you feel like the new benefits are worth the increase in annual
fee based on your spending patterns?
Also, I’m curious whether any of you have had a different reaction once you’ve crunched
the numbers.
Please let me know in the comment section below.
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