A Cost/Benefit Analysis of Keeping the Sapphire Reserve a Second Year

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The Sapphire Reserve was released over one year ago to a salivating public. That means many of you are looking at whether or not the $450 a year card is worth keeping open, and if it’s not, what exactly your best play might be.

Today I’m going to discuss a process of evaluating whether or not the Sapphire Reserve is worth holding onto for a second year. Placing value on some benefits can be subjective, so adjust as you see fit, and please share your perspective in the comments to help all our readers perform their own cost/benefit analysis.

In a future post, I’ll discuss options and actions you can take depending on the outcome of your cost/benefit analysis–downgrading, canceling, or keeping it open.

How Did We Get Here?

At the end of August 2016, miles and points enthusiasts went totally nuts over Chase’s release of a premium travel credit card, the Sapphire Reserve, and it’s eye-popping sign up bonus. The original sign up bonus–100k Ultimate Rewards for spending just $4,000 in three months–provided a huge return on spending and the litany of benefits meant on top of the bonus points you’d profit anywhere from $150 to $250 despite the $450 annual fee. Too good to be true? Yea, it was. Everyone knew that. It’s still a fantastic card but the sign up offer and benefits package have changed.

From the perspective of speaking with my peers, it’s the card that brought TONS of millennials in the game. Some people stopped applying for cards to get back under their 5/24 limit. Others (ahem–ME) decided it wasn’t worth waiting on as they weren’t anywhere close to getting back under five new cards opened within the last 24 months, but secretly (or not so much?) grew green every time they saw someone pull the metal card out of their wallet. I swear I’m not jealous.

But I’m waxing poetic. It is just a credit card after all ūüėČ

Down to business.

No Matter What Your Situation, Perform a Cost/Benefit Analysis

A cost/benefit analysis will help answer the question of whether or not you’re getting enough value from the card to continue holding it. Assuming you don’t need to close the card for churning purposes, here are the first two steps.

  1. Are you getting a retention bonus for keeping the card that is worth more than the annual fee? If so, keep the card. If not, I go to step 2.
  2. Are the marginal benefits of holding the card larger than the annual fee. If so, I keep it. If not, I cancel it.

Both steps come down to future-looking value. The annual fee is a cost, and I need to get a benefit at least as big as that cost ($450) by keeping the card.

Step 1: Are you getting a retention bonus for keeping the card that is worth more than the annual fee? 

There are two types of retention bonuses:

  1. Automatic
  2. Requested via a phone call

The Sapphire Reserve doesn’t come with automatic retention bonus (an automatic retention bonus is annual benefit upon your cardmember anniversary, like bonus points or a free hotel night). That means the only potential retention bonus is one you call to request/negotiate.

There aren’t many data points out there yet about retention bonus offers. I think it’s worth it for everyone to at least call and try, though–it’s just a few minutes out of your day that, while I doubt would erase your annual fee, could possibly knock it down some. If you have a long standing relationship with Chase via other cards, bank accounts, loans, etc…don’t forget the loyal customer angle. Watch this FlyerTalk thread over the next few months to see what kind of offers Chase customers get.

If you end up with a retention offer equal or greater than your annual fee (fat chance, but theoretically), then obviously you should keep the card. The money you will make from the travel credits, lounge access, ability to earn Ultimate Rewards quickly, etc. will more than justify holding it. If you don’t get one/are offered a small credit, continue to Step 2.

Step 2: Are the marginal benefits of holding the card larger than the annual fee? If so, keep it. If not, cancel it.

Let’s take a look at the benefits of the Sapphire Reserve.

$300 Annual Travel Credit

The structure of this benefit changed back in May and is¬†now applied on a card membership¬†year basis versus the previous calendar year basis. If you applied and were approved before May 21, 2017, starting in 2018 your card membership year is now January – December. So if you got the Reserve when it first came out, you’ll likely have gotten $600 in travel statement credits from the first year of card membership. That will no longer be the case looking forward. For the purpose of this benefit your second year of card membership begins in January 2018, so your travel credits will reset then and over the course of the year your first $300 in airfare, flight award taxes and fees, airline fees, hotels, Airbnb, car rentals, cruises, tolls/E-Z Pass, parking, Uber/Lyft, taxis, etc will be offset. After a year of burning through travel credits, you should know whether or not you spend $300 on these things in 12 months.

If you read this blog regularly and/or found it on your own, then I’d say there’s a 100% chance you do. That would bring down the effective annual fee to $150, and that’s not considering any retention offer you might receive.

 Lounge Access

Priority Pass is the world’s largest independent airport lounge access program. Chase Sapphire Reserve cardholders get free Priority Pass Select membership, which entitles them and everyone in their travel party free access to 900+ lounges worldwide (everything on the list except United Clubs.)

SkyTeam Lounge at London Heathrow, accessible with the Priority Pass
SkyTeam Lounge at London Heathrow, accessible with the Priority Pass

I’ve been in many Priority Pass lounges around the world. They vary in quality, but you can always count on free drinks, snacks, and wifi, and you can usually cobble together a meal with a glass of wine or a cocktail.

This type of Priority Pass membership would cost $399 if you bought it outright. I doubt many of you would pay for the membership outright, but if you would, then there’s very little doubt the Sapphire Reserve is worth keeping.

For the rest (and vast majority I’d wager), valuing this benefit will require a little research on your part by guesstimating how much you might normally spend on lounges (for you AND guests remember, since your travel companions can join for free).

Ability to Rapidly Earn Ultimate Rewards

The Reserve offers 3x Ultimate Rewards on travel and restaurants. Those are broad categories that include flights, hotels, car rentals, cruises, tolls, parking, Uber, taxis, restaurants, bars, fast food, and night clubs. I imagine many of you heavily spend in these categories, so the Sapphire Reserve drastically improves your ability to earn Ultimate Rewards.

Obviously one of the main reasons to keep a rewards card is the rewards from spending on it. But does the Sapphire Reserve have better earning potential than your other cards?

One way of answering this question is by taking the rewards earned from spending on the Reserve this past year (aside from the sign up bonus) and subtracting the value of the rewards you’d earn from putting that spending on other cards.

If you haven’t already received it, Chase should be sending you a pamphlet (Doctor of Credit has a picture of one here) that makes this part of the analysis a little easier. Take a look in the pamphlet as well as/or in your online account to see how many Ultimate Reward points you earned aside from the sign up bonus. How many you earned coupled with how much you value Ultimate Rewards will help you place a value on this benefit. For reference, we value them at 2 cents each when transferred to airline partners, but you can of course also redeem them for 1.5 cents like cash on¬†airfare, hotels, car rentals, and cruises.

TSA PreCheck/Global Entry Statement Credit

If you haven’t already applied for Global Entry or TSA PreCheck in the past year, you still can and receive a $100 statement credit for covering the fee. Whether or not you consider this benefit as offsetting the annual fee depends on how much value saving time/energy/stress in the airport.

Read about Scott’s experience in¬†How and Why I Got Global Entry.

Travel Insurance

The Sapphire Reserve also comes with various travel protection benefits. Read all about them in Travel Protection Benefits of Chase Cards to help you evaluate how much the benefit is worth to you.

Bottom Line

The Sapphire Reserve has an expensive annual fee of $450. The card came out roughly one year ago, so it’s time to start thinking about what your next move is.

Let’s circle back to our original questions.

  1. Are you getting a retention bonus? If so, factor that into offsetting the annual fee.
  2. Are the rest of the marginal benefits of holding the card larger than the annual fee?

If you can without a doubt answer yes to keeping the card, congrats! A year from now you’ll have to evaluate again, but¬†for now you can cruise. If you’re not getting enough value to keep the Reserve another year, then hold tight for the follow-up post about downgrading and canceling.


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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27 COMMENTS

  1. As far as benefits go don’t forget the ability to use the cards points to get a significant “discount” off the cost of many hotels. If the hotel would normally cost you $100 / 10,000 points, with this card it would only be 7,500. I think that’s definitely something to take into account when deciding to keep the card or not.

  2. If I stay at a $300 a night hotel and pay for it with my card I’ll get a credit that goes toward the travel benefit. Will I also get triple points for that purchase that I just got a credit for?

    • Yup. The statement will show a charge of $300(for which the UR detail page will credit 3X) then a corresponding $300 credit. FWIW, the UR home page will show the credit as used.

  3. Getting an extra Sapphire Reserve card for my husband (he’s Dutch and doesn’t have his green card yet so couldn’t get one on his own) with the lounge access was the best present I ever got him. He was the first to use the lounges and loved them! I am not a millennial so most of this reasoning doesn’t apply. I want to rack up points. I just used 80,000 on United to fly business class back to South Africa from DC. Well worth it. Also, all that travel insurance is great for me at this age. You never know what might happen. I already have evacuation and medical insurance through my husband’s company (we do international development) but this other insurance is very useful. We use the card for everything and it does add up, even without the 3x points. I already had the other Sapphire card so we’ve been earning those points for years. Good tip about negotiating a retention bonus. This is my third Chase card over the years so I deserve something.

  4. SPM, this is a $150 annual fee card at the end of the day for anyone who travels even minimally. Add in 3X on virtually any of the various travel categories, primary rental car coverage, Global Entry etc.. and it would be very hard to find a better overall card. Yes, AMEX has some good features too but those accumulate MR’s, and as you know they are a totally different earning currency.
    Stated simply; The Sapphire Reserve is a must-have, at least IMO.
    Good analysis, BTW. Thank you.

  5. Even if you are not a frequent traveler (we aren’t – 2 trips a year), and so would not value Priority Pass at the prices indicated or you wouldn’t pay for lounge access, you can figure how much it might save you based on what you might spend for food at the airport. Just another possible way of looking at it.

    We got a lot of value already in our first year (two $300 travel credits, Global Entry, savings on insurance on 2 cruises, access to several lounges when we weren’t flying business class, and 3x points) – more than making up for a few years worth of fees

    • Marilyn..not aware of insurance savings. you mean travel insurance? cruises, car rental and plane companies push that heavily and it is expensive. guess i need to read some fine print.

  6. your thoughts please. i have the freedom, which is free, ink business bold, and sapphire reserve. too much$ out as i only make about three trips a year. so which do you suggest i dump? thank you my gnu of the points kingdom…

    • To put it simply: Can you fully utilize the $300 annual travel credit on the Reserve? If you can, then I would probably keep the Reserve and dump the Ink Business Bold. If not, then keep the Ink Business Bold and downgrade the Reserve to the Freedom Unlimited.

      • I think this is horrible advice. The Ink Bold offers opportunities for significant UR points accumulation (up to 250,000 points per year) at low or no cost, through use of the 5X spending categories. I don’t know why anyone would want to give that up voluntarily, especially since the Ink Bold is no longer available, and she won’t be able to get another one if she cancels it. On the other hand, it seems likely that she would be able to get a new Sapphire Reserve card — and a new signup bonus — if she cancels that card now.

  7. I don’t trust the card Ins. my health Ins is good on the Moon But I still get AIG travel Ins . I don’t think it covers Award Flts BUT I want the Medical to travel home . I see last year it covered $100K now $175 K and the silver is like $10 per day better then large bill . I asked but no one wants to do a post on the best Ins way to award travel .

    CHEERs

    • I reviewed the CSR travel insurance policy with our TA for our upcoming cruise. We are on Medicare (no overseas medical coverage) with Medigap supplemental insurance that will cover $50K lifetime emergency overseas medical. Since we have not used this benefit, we have that full benefit available to each of us, and that amount is better than the Alliance policy being offered. The CSR covers everything else that the cruise insurance would. However, we do have an annual Medjet Assist evacuation policy (took it out in April because we were driving around Sicily on an independent trip – no other trip insurance except from CSR and CSP), so that covers more evacuation than CSR. The insurance for the cruise would have been $478 based on price of cruise and our ages, so significant savings.

  8. I really have 3 when I travel But u never know if they will pay .My buddy got nailed for $5K after they said they would pay . I met a tour group in France 2 got airlifted home .

    THANKs

  9. Also don’t forget primary car rental insurance. That’s about $15 a day/car rental.
    To me that’s priceless just for the peace of mind and especially since I just received $4200 check for fender bender that was my fault.

  10. D
    Great i love to heard when the stuff works. my car ins does that i would claim both and see who pays .my ins no claim no price increase next year.how long did it take 4 $$$$$

    • It took less than a month actually. The car rental agency charged my card for the damage (yay to extra 12600 points) and the insurance cut me a check. That amount is not gonna be due on my card for another month or so.

  11. Sapphire Reserve card is very good however if anyone is lucky enough to get the JPM Reserve VISA Infinite it looks to have the same benefits and more.

  12. My wife and I both have the card. We’ll cancel one of them, but then i struggle w/ whether to get my wife an authorized user card on my acct. Its $75 and not sure its worth it for the off chance she might travel without me and need to access a lounge without me. That doesn’t happen frequently, if at all in a year. Just once or twice.

    • yes i agree. I think it is pigish to charge that much or anyone extra really as the other person (spouse even) dosent get points on their own or any real benefit that i see. taking that off for sure even if i decide to keep it for another year.

  13. Love my INK BOLD I have all accounts tied into that . I could get 60K points a year by having one card . That with the Citi-P card 4th FREE I’m set . Can’t wait till I can start up bonces on the Hotel cards again .
    INKer for ever
    CHEERs

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