For some time now, Ultimate Rewards have been the top flexible currency. The addition of the Chase Sapphire Reserve made them even more valuable when redeeming through the Chase Travel Portal. They have a sizable lead when comparing against American Express and Citi. Have Ultimate Rewards become too valuable, setting them up for a devaluation?
Have Ultimate Rewards Become too Valuable?
Ultimate Reward Flexibility
One of the best things about Ultimate Rewards is their flexibility. They have many redemption options and they redeem at high values when compared to competition.
There are plenty of ways to use your Chase Ultimate Rewards:
- Cash back at 1 cent per point
- Gift cards at 1 cent per point
- Amazon at 0.8 cents per point
- Chase Travel Portal at 1.25-1.5 cents on airfare, hotels, cruises, car rentals, and even travel experiences
- Chase Partners with variable amounts
The main reason to have Ultimate Reward earning cards is for the travel redemption. If cash back is your game, you can earn more with different cards. Although redeeming Ultimate Rewards for cash isn’t the best offer, you can still redeem at 1 cent per point, for cash and not required to use for gift cards only.
Chase allows you to pool points with an authorized user, if you share the same address. There is no expiration date after pooling your points, unlike Citi, so you can just consolidate your points to one account consistently.
You are able to transfer your points to authorized users frequent flyer accounts, which is similar to American Express.
For a travel redemption portal, Chase is probably the best one of the big banks. Redeeming for 1.25 to 1.5 cents per point for many travel related options is consistent and allows for more flexibility when compared to other reward currencies.
There were plenty of articles mentioning a survey sent out by Chase about possible changes to the Ultimate Reward Program.
I don’t think this survey is anything to get too excited about at this point. That doesn’t mean Chase isn’t considering changing their program.
You’d be foolish to think Chase doesn’t read the blogs and see how people look to game the system for rewards.
People even alter their credit card strategy to fall below the 5/24 rule! Which I think is crazy, because there are so many cards with great offers, you do not need Ultimate Rewards to make your travel more affordable.
In comparison to other programs, they have some pretty lenient rule (well except for that terrible 5/24 rule).
- You can freely transfer Ultimate Reward to your spouses Ultimate Reward account as long as they are an authorized user.
- All programs transfer at 1:1 ratio
- Redeeming through the Chase Travel Portal, you can redeem at 1.25 to 1.5 cents per point
- Use can redeem at 1 cent per point when redeeming for gift cards or cash
Both American Express and Citi have restrictions when you combine your points.
American Express you can’t pool Membership Rewards points, but if you are an authorized user you can send your Membership Rewards to your spouses frequent flyer/hotel account. Citi will allow you to pool your points, but they expire 90 days after you transfer. Both of these limitations are absent from Ultimate Rewards.
Chase Ultimate Rewards points transfer to all partners at a 1:1 ratio. Compare this to American Express and Citi, they both have partners where transfer ratios are less than or more than (Hilton) 1:1.
Changes to Chase Sapphire Reserve?
After a successful launch of the Chase Sapphire Reserve, Chase is considering benefit changes to cut cost associated with the card.
When this card first launched, the Sapphire Reserve came with a huge bonus. Chase “lost” $200 million on this card (poor Chase, right?)
I thought it was a no brainer to apply for (if you were eligible). I have been consistent in thinking Chase will see a large number of cancellations when customers annual fees are due. For many, I don’t see this being a long term keeper and if Chase changes benefits, people on the fence could be swayed away from the card.
Chase knows it will not need to offer retention offers for this card, nor should they. They rarely hand out retention offers, because they know people want these cards. They aren’t desperate for your business because they know they are top dog.
With a card like the American Express Personal Platinum, which pales in comparison to the Sapphire Reserve, we could see the Sapphire Reserve join the $550 annual fee club.
I think Chase realizes their points are very popular with people look to take advantage of their travel benefits. They are easy to accrue, have great transfer partners, and they have pretty good customer service. As Chases looks to cut benefits for their Sapphire Reserve, this will lead to a re-evaluation of their Ultimate Reward Program. Which in turn will save them a lot of money.
Instead of making other programs up their game to reach Chase, I think Chase sees an opportunity to reduce the value from their reward program. While reducing their value, they will be sure to keep it above the other programs. Why give the other banks an opportunity to improve when you can bring your product closer to their level?
If Chase does decide to reduce their value, they could still be as valuable/slightly more valuable than their competition. This all depends how the magnitude of changes made.
These are a list of things that could occur before the year is up.
Limit on Pooling Points
Currently, you can transfer all the points you want from one of your accounts/authorized user accounts to another. This definitely makes earning Ultimate Rewards very easy.
Chase also has some of the most friendly policies when combining/using Ultimate Reward points, but I think we could see a point transfer restriction. This could be either a transfer max per day, or total limit for a year. I wouldn’t be shocked if we saw pooling limits around 200,000 to 250,000 points per year. This could also be for the entire account, not just particular cards.
I don’t think we will see an expiration date added to this restriction, but limiting point transfers could really impact those with many Ultimate Reward cards.
Although, we could see Chase eliminate pooling of their points, but I think that is too drastic and is more unlikely (at this time).
Transfer Ratios Between Cards
In Chase’s survey, it mentioned altering point transfer rates between cards with annual fee vs no annual fee.
If Chase were to adjust this for a 5:4 to a 4:3 ratio when moving from a no fee card to a premium Chase card, this would make cards like the Chase Freedom, Freedom Unlimited, and Ink Cash less lucrative. This would still give you a decent return on your points, but definitely not the return you are receiving now.
Cash and Partner Transfer Ratios
Chase is the only bank I can think of that has a 1:1 for all their partners. If you look at American Express and Citi, they have partners with a ratio less 1:1. We could see Chase enter this realm with their more valuable transfer partners.
In addition to the limits on transfers between cards, we could see a different transfer ratio for programs. The program I think this would happen to first? Hyatt.
Looking at American Express, their points transfer to their SPG program at 3:1. Hyatt’s award chart is quite favorable (even though they are setting themselves up for devaluation) and transferring Ultimate Rewards at 1:1 ratio, make it very easy to earn free nights.
I think we we could see a 4:3 transfer rate with the Hyatt program. This would reduce the redemption value and would encourage people to use their Hyatt cards more. My Hyatt card doesn’t see the light of day, it sits in a drawer collecting dust. I personally keep it around for that $75 “free night.”
There could be other changes to transfer ratios, but I think Hyatt would definitely be the first program to have their transfer ratio change.
Chase Portal Redemptions
For Citi and Chase (Sapphire Preferred), you can redeem your points at 1.25 cents when redeeming through their portal for travel. This is far better than American Express 1 cent for airfare and 0.7 cents for hotels.
The Sapphire Reserve is a solid 1.5 cents per point and when coupled with other cards like the Freedom Unlimited and Freedom, this makes your return between 2.25% and 7.5%. That is pretty amazing. If we learned anything from the Citi Prestige, these increased redemption options are not going to last.
I could see Chase reducing this to 1.35 cents per point. This will make it slightly better than the Sapphire Preferred, but also reduce the value we currently see. This would also keep the Sapphire Reserve above it’s competitors.
I think one way to reduce this risk, would be if Chase decided to adjust transfer ratios between cards. If that occurs, then I’d think this stays at 1.5 cents per point. If Chase did both, that would be too much, too soon.
I think Chase knows their points are more valuable than their competition and could be setting up a devaluation of their program. What will the extent of that devaluation be? I truthfully have no idea. These are all ideas I think we could see by the end of this year. Chase might announce these changes after the annual fee is charged for people keeping the Sapphire Reserve to be prevent more cancellations.
Chase is trying to reduce cost and changing their Ultimate Reward Program will do that. Hopefully the devaluation isn’t too harsh, but with Chase looking to recoup the money lost with the Chase Sapphire Reserve, we could see some sizable changes.