Last August, the Chase Sapphire Reserve card blazed onto the premium card market. But, unlike the premium cards (higher annual fee cards) before it, it didn’t just end up attracting people who normally go for the $400+ annual fee cards like the Amex Platinum. Instead, it drew far more customers than Chase had ever imagined and they even ran out of the metal cards that were part of the signature new card. So, with just about one year behind us, is the Chase Sapphire Reserve too good to stay true?
Is The Chase Sapphire Reserve Too Good To Stay True?
How Good Was the Chase Sapphire Reserve?
Unlike some other premium cards, there was almost no reason for people to not sign-up for the Chase Sapphire Reserve. Even though it landed with a $450 annual fee, the sign-up bonus of 100,000 points was huge. In fact, that 100,000 points could be redeemed for cash/statement credit in the value of 1 cent per point. So, this very lucrative sign-up bonus would translate to $1,000 – more than enough to cover the $450 annual fee.
But, that wasn’t all! New cardmembers also would receive $300 in travel credit for each calendar year (now it is each cardmember year) to total $600 in the first year of card membership. The best part about that travel credit is that it wasn’t just for airlines and airline incidentals (like the Amex Platinum). It could be used for things like metro/subway tickets, tolls, rental cars, and more. That meant that even people that had no desire to hop on a plane could easily realize that $600 in statement credits.
Ignoring things like the $100 Global Entry/TSA PreCheck reimbursement and the extremely generous Priority Pass lounge membership, the card offered way more than it would cost new members up front. Here was the math for the first year of card membership – if the person just treated the points as a statement credit:
- $450 annual fee
- $1,000 in cash/credit from sign-up bonus
- $600 in widely termed “travel” credit
- Total value – $1,150
That is an amazing value for a premium card – without even touching the other benefits!
Where the Chase Sapphire Reserve Stands Now
Chase lowered the sign-up bonus to 50,000 points earlier this year and also changed the policy on travel credits to be one in a cardmember year. So, the math now is a little lower now and requires the new cardmember to look more at the extra perks that a premium card offers:
- 50,000 points
- transfer points to partners at 1:1
- use points for travel through the Chase portal at 1.5 cents per point
- 3x points on dining and travel
- $300 annual travel credit
- $100 Global Entry reimbursement
- Priority Pass
- Car rental perks
- $450 annual fee
So, this card is now more firmly targeted at the customer who wants to travel since new customers will not come out that far ahead just going for the cash. It is obvious that Chase had to shuffle things up a bit to make sure they were not going to lose more money on acquiring new customers with the previous lucrative offers.
Where will the Chase Sapphire Reserve Go From Here?
A recent article in the Wall Street Journal said the Chase is “pushing for about $200 million in fresh cost cuts in the unit that oversees the card.“
While this may be nothing more than trying to shake up people a bit and test reaction, I do believe that Chase is going to have to make some cuts to this card’s rewards to make it work in bringing them value. We have seen American Express and Citi make cuts to benefits this year/raise annual fees to make the card more profitable for them.
Also, don’t forget that this card has some very decent affiliate payouts – well over $100 per successful card application (including to this site should you apply through my links). I personally don’t feel this card needs affiliate links (and said this last year before the card even came out) but I would imagine they will keep paying. Maybe drop them significantly, though?
The Point Redemption?
I would imagine that the 1.5 cents per point on redemptions through the Chase Travel Portal is too lucrative but Chase also positioned themselves in a difficult spot in this department. The Chase Sapphire Preferred offers 1.25 cents per point so the Chase Sapphire Reserve cannot dip that low. And Chase cannot really drop the Chase Sapphire Preferred to 1 cent per point while moving the Sapphire Reserve to 1.25 cents because there would be zero incentive for their customers to not just cash out the points and then use a credit card to buy the travel. It would require that Chase really mixed things up to change that.
Stricter Travel Credit?
They could make the travel credit more restrictive but, again, this would probably require Chase shift a lot of things around. The travel credit works on a similar vendor basis as the awarding of bonus points for travel.
Higher Annual Fee?
I believe that the only immediate option for Chase going forward would be to institute a higher annual fee. This would probably see many people drop the card but it would likely encourage the customers that Chase wants to stay.
I know that I will be keeping our Chase Sapphire Reserve since I value the $300 travel credit as an easy offset from the annual fee since it covers travel I would easily be paying for anyway so it brings the effective annual fee down to $150. That is only $55 more than the Chase Sapphire Preferred and it comes with lounge access and the higher redemption through the portal so it definitely makes it a keeper for us (especially since it is my wife that has the card and she has no elite status so the lounge access is great for her).
What changes do you think Chase may institute for the Chase Sapphire Reserve? Do you think it is too expensive for Chase in its current state?