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2020 came with a big surprise for those in the credit card points and miles community. Chase announced several significant changes to the Sapphire Reserve. Being one of the most popular premium travel cards, this prompted negative reactions across the internet. But are the Chase Sapphire Reserve changes really that bad? In this post, I hope to help you determine whether the change adds or decreases the value proposition of the card.
My favorite travel credit card
As many of you know, the Chase Sapphire Reserve is one of my favorite credit cards. It’s been the core of my Chase Ultimate Rewards setup, and I imagine to many of you as well. 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 our large YouTube collaboration last year on what would be my “one card” if I could only keep a single credit card.
Nothing is constant in his hobby
A lot of people online are acting like 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.
What’s changing with the Chase Sapphire Reserve
Higher annual fee
The big change is 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 with the higher welcome offer. The Sapphire Reserve was surprisingly popular when it was first released. I remember Chase even running out of metal cards since they were flooded with applications.
New benefits and credits
The other set of changes are in the form of credits and benefits. This is where a lot of people have gripes. It’s understandable, as the benefits seem to be targeted toward a focused customer segment, specifically those who live in larger metropolitan cities and utilize ride-sharing and food delivery services.
$60 annual DoorDash credit
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 benefit is the DashPass membership. This is worth about $10 per month and basically waives your ordering and delivery fees when using DoorDash.
Lyft Pink membership
The third new 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.
10X points earning rate for Lyft rides
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.
What do I think about these changes?
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.
Everyone’s situation and lifestyle is unique, so determining whether the changes are positive is a very personal question. However, 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.
Quick review of terminology and assumptions
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.
My calculations do not account for other cards that be might in your wallet that have similar benefits or bonus categories. For example, you might have another card or card setup that rewards you for dining out, like the American Express Gold. It also doesn’t account for other discounts or promotions that you might have access to that would affect the value of these new Sapphire Reserve benefits. However, I will compare my Sapphire Reserve value calculations to what I would have earned on the Sapphire Preferred instead.
7 value considerations and calculations
1. Examining your fixed credit benefits:
Since these credits 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 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.
The other fixed benefit is trickier. It depends on your usage. Fiona and I tend to order food at least twice a month, usually on a Friday night after we 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!
Consider using your DoorDash credit while traveling
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.
2. Consider your Lyft usage:
15% off Lyft rides can be valuable
I didn’t think that I used ride-sharing that often. However, when I pulled my data from You Need a Budget (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 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.
Based on this data, I estimate that the Lyft Pink membership is worth around $45 per year for me. 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.
10X points bonus on Lyft rides
The other thing to consider is that you’ll now earn 10X points on Lyft rides. For my numbers, 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. I am multiplying by 7 instead of 10 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.
Based on my ride-sharing usage, I value the Lyft benefits to be around $77 per year for me.
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.
If you’re someone who doesn’t get charged a delivery fee or prefers to pick-up your order, that may influence your savings. 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 prices are known to vary among food delivery services.
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, we’ve managed to extract a lot of value from our Priority Pass lounge membership.
Lounge access value
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 last year. Two visits were on my own and two were with Fiona as my guest. I estimated that each visit was worth $10 per person in food and drinks.
Restaurant credit value
We also used the Priority Pass restaurant credit four times last year. Two visits were on my own, and two were with a guest. The benefit was worth $168, but I only redeemed $121 worth of food and drinks at the restaurant. Gratuity is separate and not covered by the restaurant credit. I discounted the total by 20%, giving me an estimate of approximately $100.
A consideration that should be factored in is whether we would have actually purchased anything at the airport 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 we would have waited for the airline meal service. That makes this value difficult to estimate. Though 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 at the airport for the year seems 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 travel and dining bonus purchases was $3,800 for the Sapphire Preferred and $3,333 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 $5,556 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 the $12,000.
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 spending 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, I find that I get regular savings from one of my travel benefits—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 cards have this benefit. Therefore, it might not be factored into your calculation. However, when I checked my records, we rented a car for 25 days last year. That’s mostly because of your honeymoon road trip. 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.
Unfortunately, I don’t think I normally use rental cars for 25 days a year. When I looked at 2018, I only booked seven days of rental cars, which is a more realistic number. With seven days, we’re looking at about $140 of savings by opting out of the insurance offered by the rental car companies.
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. The Chase Travel Portal redemption rate for the Sapphire Reserve is 1.5 cents, and for the Sapphire Preferred, it 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. The difference is more significant if your points total is larger. However, this is 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. You may be devaluing your points if you downgrade your Sapphire Reserve to the Sapphire Preferred card.
In case you want a tool to calculate these factors, I’ve posted a copy of my Google Sheet that you can use to follow the same methodology. The spreadsheet will give you additional precision since it allows you to adjust the assumptions in the worksheet.
If I tally up all the potential savings from these calculations, you can see that I come out ahead with the Sapphire Reserve, 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. Based on my value calculation, I’m still better off with the Sapphire Reserve over the Sapphire Preferred due to my spending pattern and lifestyle.
Your mileage may vary
Again, this is just my experience. We live in Los Angeles and use both ride-sharing and food delivery services. We also travel a fair amount. 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 post/video gives you some structure on how you might determine the value of these benefits.
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.
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