Doing the Second-Year Math on the Chase Sapphire Preferred

Discussion in 'Other Credit Card Programs' started by Ed Chandler, Oct 26, 2012.  |  Print Topic

  1. Ed Chandler
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    Ed Chandler Silver Member

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    Hey, all,

    My Sapphire Preferred (SP) is getting close to its anniversary date, so I'm trying to justify the $95 annual fee for year number two. At present, I also have the Freedom (FR) and Ink Bold (IB). So, the following is my per-benefit breakdown of the SP when weighed against the benefits provided by holding the other two cards. Stated differently, this is not an analysis of, "Which card should I get?" This analysis determines what the Sapphire Preferred offers beyond what the other two cards already give.

    I'd like to hear what others have to say in case I'm missing something or in case my facts are wrong:

    “Non-Bonused” Spending
    • SP earns 1.07 pp$
    • FR earns 1.1 pp$ + 10 points per transaction (with Chase “Exclusives”)
    • IB earns 1 pp$ (or 5x, see below)
    Analysis: Freedom wins.

    “Bonused” Spending:
    • SP earns 2.14 pp$ on travel and restaurants
    • FR earns 5.1 pp$ +10 points per transaction on quarterly rotating categories
    • IB earns 5 pp$ on office supplies and 2 pp$ on gas and hotels
      (and 5x everywhere indirectly through prepaid cards)
    Analysis: It depends.
      • The Freedom always wins within its own bonus categories, but otherwise…
      • The Ink Bold wins for office supplies and gas.
      • The Sapphire Preferred wins for travel (including hotels).
      • The Sapphire Preferred wins for restaurants if you spend more than $9.61.
      • In all other cases, the Freedom wins.
    20% off on Travel Purchased Through the UR Mall
    Instead of transferring points to a travel partner, you can buy travel through the Chase UR mall. When you do so after having clicked through with your Sapphire Preferred card, you get a 20% discount.​

    Analysis: In most cases, the best travel value for UR redemption is found by transferring them into them to a travel partner (such as United). The exceptions to that rule are:
    ..
    1. When the award has a low dollar value in the UR mall, but a comparatively high fixed-point price on your transfer partner airline. For example, if flying ORD-STL costs $125 in cash or 25,000 points, then you’re better off “buying” the ticket with points at 20% off … assuming you can get that price through the UR mall.
    .
    2. When “buying” the travel makes the difference between qualifying for status or not. For example, if a hotel stay costs $500 or 40,000 points, then “buying” it at 20% off is a break-even proposition – it’s 40,000 points either way. But if you’re only one “stay” away from making your hotel status, then “buying” the stay with points makes sense.
    .
    (Note that it’s not as simple as saying “if you’re into status, then buy travel instead of transferring.” Because the number of miles/points/stays resulting from “purchased” UR redemptions is likely to be a very small part of your overall qualification, “buying” the travel with points at 20% off only makes sense if it pushes you over a qualification boundary you would not otherwise cross.)
    .
    1:1 Transfer with no Transfer Fees
    Analysis: No value … the Ink Bold also gives this benefit.
    .
    No Foreign Transaction Fees
    Analysis: No value … the Ink Bold also gives this benefit.
    .
    Access to the Sapphire Preferred “Multipliers” in the UR Mall
    Each of the different cards considered here has a different set of bonus merchants when you click through the UR mall. Sears might be 5x with one card but only 3x with another.
    .
    Analysis: If you do not shop through the UR mall, then this benefit has no value. Even if you do, this benefit only has value to the extent that the Sapphire Preferred bonuses are substantially different from those offered by the other cards and you actually buy from those merchants. (This has never been the case for me.)
    .
    “Fringe” Insurance Benefits
    All of the cards come with their own mixture of baggage insurance, car rental insurance, purchase protection, etc.
    .
    Analysis: I don’t think any differences in these “fringe” benefits is enough to push my keep/cancel decision one way or the other. (I know that the Ink Bold’s car rental insurance only applies if you’re renting for “business purposes”, but otherwise I’m unaware of any substantive differences.)
    .
    Direct Access to a Live Advisor
    You always get a human when you call the number on the back of your Sapphire Preferred card. There are no phone trees and I’ve never been placed in a call queue.
    .
    Analysis: I classify this as an “intangible” benefit. I do appreciate getting immediate human contact, but I’d be hard pressed to assign a dollar value to this benefit.
    .
    The Card Just Looks Cool
    The Sapphire Preferred card is a thick, metal-core card with no raised numbers.
    .
    Analysis: This is another “intangible” benefit. I enjoy the attention this card gets when I use it, but not enough to make me use it if another card is going to earn more. As the analysis above shows, this is almost always the case.
    .
    Final Analysis
    Taking all of that into account, there are only three “economic” advantages to the Sapphire Preferred card, and then only in certain unlikely circumstances:
    .
    1. It is the top earner for travel or in restaurants when your tab is over $9.61. (Though, if you use the Ink Bold/prepaid scheme, it’s never the best choice.)
    .
    2. It may save you a few dollars on low-cost travel or provide a small nudge into your next status tier if you purchase travel with points through the UR mall at 20% off. (In most other cases, and especially for “aspirational” travel, transferring UR points to travel partners is a better value.)
    .
    3. It may earn you a few extra points if you shop through the UR Mall at the few merchants whose bonus multipliers happen to be best with the Sapphire Preferred card. (Judge for yourself, but in the past 90 days this has been Buy.com, Groupon, Bloomingdale’s, Dell Home, Ralph Lauren, & Pottery Barn.)
    .
    That list may read as though I wrote it with an air of sarcasm, but I assure you that wasn’t the intent – I think my analysis above was fair. Still, the Sapphire Preferred card will save me money or earn me more points only under those circumstances.
    .
    To me, those won’t amount to $95 worth of value. What say the rest of you?
     
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  2. mommypoints

    mommypoints Gold Member

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    I say get the MC version for year two. ;)
     
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  3. servo

    servo Silver Member

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    Are you using the .07 in the CSP base earnings as the 7% annual point bonus? If so, the financier in me would disagree with realizing the .07 at the time of purchase, when you may have a circumstance that prevents the receipt of those points at the end of the year. I guarantee this is how Chase treats those "bonus" points as well.

    If anything, that devalues the card even more, because if you're like some of the people on FT who have abused transfers of UR points to non-spouses, and have their cards shut down, they never realized those bonus points, as well as people who cancel their card before they get to the bonus date. I would agree with your assessment overall, and when I do get this card, I won't be keeping it.
     
  4. Ed Chandler
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    Ed Chandler Silver Member

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    Well, duh. ;-)

    Again, this isn't about which card I should get. It's about the additional value of keeping this one. It's part practical and part intellectual curiosity.
     
  5. Ed Chandler
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    Ed Chandler Silver Member

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    Yep. I did so intentionally. It would be hard to apply a "maybe factor" to find the value of the 7% bonus you might get, but I reasoned that including it anyway would represent a best case scenario for the SP.

    My point, precisely. ;-)

    Also agreed. However, if you consider the 7% bonus on spend to be contingent on paying the $95 annual fee, then the SP would be even further devalued since the break-even point on restaurant spend would go from $9.61 to $11.11.

    In summary, when there was doubt about the value of a "benefit", I tried to err in favor of the SP.

    Even then, the analysis holds.
     
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  6. mommypoints

    mommypoints Gold Member

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    I think for most people who have the cards you describe the math probably doesn't actually support keeping the CSP for year two unless you have a real significant amount of dining and travel that go on this card. I know for me, airfare goes to Amex Biz Gold Rewards, hotels are already 2x on Ink (so you do lose the 7% bonus, but it's not a huge difference), and car rentals go to my MileagePlus card, so that mainly leaves larger dining purchases for this card. However, other cards are often offering targeted or limited time offer 5x for dining, so there goes a bunch of that spending.

    That said, it doesn't mean it is a bad decision to keep it, but I highly doubt the math supports it for those who have other cards. For those that don't have lots of other cards, this remains my favorite personal card. I kept mine year two, and may keep it again, but I am sure if I did the math it doesn't really add up.
     
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  7. servo

    servo Silver Member

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    There have been reports that people have received their bonus after "paying" the fee, but have had the fee waived since they were within 60 days of the fee posting when they canceled. For the unsavvy or unlucky, your statement is exactly right, but I plan to attempt the method of acquiring the bonus, xferring out all UR points to partners, and then canceling the card with a fee waiver attempt. You probably should too, if you're willing to risk them denying reimbursement of the fee.
     
  8. Ed Chandler
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    Ed Chandler Silver Member

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    Thanks, MP. Heck, the time spent on the analysis was probably worth more than $95.

    I always consider that I may have missed something relevant. Peer review is a good thing. :)
     
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  9. Ed Chandler
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    Ed Chandler Silver Member

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    This has never been an issue with Chase.
    Nevertheless ... sound plan. Thanks for the tip.
     
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  10. boondr

    boondr Gold Member

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    I thought the CSP bonus was paid on the calendar year not anniversary.
     
  11. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    That was my only thought when I glanced over your post ;)
     
  12. iterfacio12

    iterfacio12 Silver Member

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    Very logical analysis; though I do have to concur that your work on this has cost you at least $150 in time spent.
     
  13. knick1959

    knick1959 Silver Member

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    Don't you need the CSP card to be able to transfer UR points directly into other FF programs? If you're buying tickets from the mall, I guess it isn't necessary. However, I'm planning on keeping my own direct FF program transfer options open.
     
  14. Ed Chandler
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    Ed Chandler Silver Member

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    Nope. The Ink Bold does that too - another duplication.
     
  15. knick1959

    knick1959 Silver Member

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    Really??!! I didn't know that, but it is good news. I should get my Ink Plus in the mail this week (had to call to get approved, and I'm still waiting, but I was told I was "in"). Same thing for the Ink Plus? I suppose that will make me have to do some recalculating, although I do have some time before year 2 starts.
     
  16. giocatoredoro

    giocatoredoro Silver Member

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    I wouldn't renew if I were you. It'd be hard to justify the $95 of incremental value you'd get by holding onto the card given that you're planning on keeping the others. The CSP is my favorite card, but if I get the ink Bold, I won't be renewing.
     
  17. mrredskin
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    mrredskin Gold Member

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    looking back, i shouldn't have renewed - or at least should have gone with the MC.
     
  18. Dad to GO

    Dad to GO Silver Member

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    What kills me is that the only way I can get my 7% bonus for this year is if I keep my card open for another. I didn't hit the spend requirement until January 4th (miss calculated by $100)... I guess getting 7% on 100K points is okay though. Just going to cost me $95.
     
  19. jeffrey930

    jeffrey930 Silver Member

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    Same here my annual fee is coming up in december and my first statement close on Jan 2012. I guess I will just keep it for the 2nd year to get the 7% bonus...unless the bonus post right away and I can get a refund for the annual fee.
     
  20. Ed Chandler
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    Ed Chandler Silver Member

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    You must have spent the heck out of that card. I confirmed (twice) that the sign-up bonus is not included in the 7% annual bonus. (The rep said that it never had been, though I believe this change was made in the last year.) So, in my case, having spent just shy of $20,000 on the card, my 7% bonus would have been about 1,400 UR points. Spending $95 for 1,400 UR points comes out to a laughable 6.7 cents each. That made the decision really easy. (I can beat that with one trip to Office Depot.)

    Even if you value UR points at a very generous 2 cents each, you'd have to accumulate base points of 67,857 (through any combination of bonused and non-bonused spend) to "break even" paying $95 for a 7% bonus.

    I HATE to have to pull this awesome-looking card out of my wallet, but it looks like I've added a new ice scraper to my collection.

    (NOTE: Even if the 50k bonus HAD been included, spending $95 to get the 7% would have worked out to 1.9 cents per UR point ... still non-stellar.)
     
  21. mommypoints

    mommypoints Gold Member

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    Correct - the sign-up bonus (among other things) was counting in the 7% last year, but a letter went out earlier this year saying it would not count in the future.
     
  22. Dad to GO

    Dad to GO Silver Member

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    I think you are 100% right. I for some reason forgot that the 50K bonus points will NOT count towards the dividend. Maybe it's because I was still thinking about the previous years. Looks like I may be canceling my card come December when I open the SW personal and business. I'll stick to the Ink Bold and maybe add an Ink Plus too! It's all just a game in the end.. isn't it? :)
     
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  23. Ed Chandler
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    Ed Chandler Silver Member

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    Yep, I knew that change was made (though I don't recall getting the letter). I just didn't know whether it was retroactive or only applied to new applicants after whatever that date was. Oh well ....
     
  24. Dad to GO

    Dad to GO Silver Member

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    I just got hit with my renewal fee... I'm really debating on whether or not I keep the card as well. I want to go after the SWA personal and business cards but if I keep the Sapphire open I am worried that I could be pushing my limit with the number of Chase cards I have open. I guess I've never been denied by Chase so there isn't necessarily a reason to think that just because I have X number of cards that I'll get denied. Maybe I will try and call them to see if I can at least figure out if I'll get the 7% on my bonus or not for this year.
     
  25. Ed Chandler
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    Ed Chandler Silver Member

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    You'll get the bonus. That's not the issue. The issue is whether:
    value(.07(pointsearned)) +value(incrementalbenefits) >= $95.

    As for the number of cards being a factor ... maybe ... I haven't hit "x" yet. ;-)
     
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