For years, I used credit cards that had no annual fee. It didn’t make sense to me.
Credit cards sure are convenient but would I pay $50 for the convenience? $100?
Then credit card companies started adding benefits. Cashback. Sign up bonuses. Lucrative reward structures.
My first credit card with an annual fee was a Southwest Rapid Rewards Premier Card. I did it because we fly Southwest all the time, I was trying to earn the Southwest Airlines Companion Pass, and the math checked out. But that fee was modest and mitigated slightly by a loyalty bonus.
So when I saw the Chase Sapphire Reserve card with a $550 annual fee – it caught my eye.
I’m not someone who cares about the cachet of having an exclusive credit card. I’ve seen the American Express Centurion Card (the AMEX Black Card) and it looks and feels cool but I’m a hard pass on that $2,500 annual fee.
So is the Chase Sapphire Reserve card worth the $550 annual fee?
Table of Contents
50,000 Ultimate Rewards points Sign Up Bonus
First, the sign up bonus is strong – you get 50,000 Ultimate Rewards points (from their Chase Ultimate Rewards program) after you spend $4,000 in purchases within the first three months.
Those 50,000 Ultimate Rewards points are worth $500 in gift cards or $750 in travel when you redeem it through the Chase Ultimate Rewards portal. When you use the portal, you get 50% more on point redemptions.
As far as sign up bonuses go, it’s what you’d expect for a card of this stature. A comparable card, the American Express Platinum card, will give you 50,000 Ultimate Rewards points and has an annual fee of $550. (here is a head to head comparison of the AMEX Platinum and the Chase Sapphire Reserve)
The welcome up bonus helps cover the annual fee, which means your first year is ostensibly free. It gives you a chance to check out the card to see if it fits your spending needs. All the while, you get that $300 travel reimbursement benefit as well as free Global Entry or TSA PreCheck and airline lounge access.
$300 Annual Travel Credit: The biggest perk is the $300 annual travel credit. It is automatically applied to any purchase that qualifies as travel. You don’t need to pick the transaction or explain where you’re going, they just see it and reimburse you.
Airport Lounge Access: The card gives you Priority Pass Select membership, which will get you into 1,000+ airport lounges domestically and internationally. The network is sizable, one of the largest private non-airline systems, and includes some pretty high class lounges. When you fly, check the website to see the full list.
Global Entry & TSA PreCheck: Apply for Global Entry or TSA PreCheck, pay with the card, and Chase will reimburse you the fee once every four years. If you have neither, I would apply for Global Entry since it includes TSA PreCheck. If you already have one, you can apply for someone else. Chase just sees the charge on your statement and reimburses it, it doesn’t have to be for you.
Free DoorDash Delivery & Lyft 10X Rewards: Lastly, you get free DoorDash delivery (no delivery fee on orders) plus 10X total points on Lyft rides.
Visa Infinite Benefits
The Chase Sapphire Reserve is a Visa Infinite card so it comes with all the benefits associated with Visa Infinite.
For travelers, the biggest benefits are in the “insurances” they offer.
- Trip Cancellation/Interruption Insurance: If your trip is canceled or you need to cut it short because of sickness, weather or other situations, you can be reimbursed up to $10,000 per trip for prepaid nonrefundable travel.
- Auto Rental Collision Damage Waiver: This is “rental car insurance,” which means you can declined the rental company’s collision insurance and the coverage is Primary (ahead of your personal auto insurance) for up to $75,000.
- Lost Luggage Reimbursement: For you or an immediate family member, covered up to $3,000 per passenger.
- Trip Delay Reimbursement: If your common carrier is delayed more than 6 hours or requires overnight, you’re covered for unremibursed expenses like meals and lodging up to $500.
- Emergency Evacuation & Transportation: I hope you never need it but if you get injured or sick, you’re covered for medical services and transportation up to $100,000.
- Purchase Protection: Covers new purchases for 120 days against damage or theft, up to $10,000 per claim and $50,000 per year.
- Return Protection: If a store won’t take it back within 90 days of purchase, you can be reimbursed up to $500 per item or $1,000 per year.
- Extended Warranty Protection: Adds a year to the manufacturer’s warranty as long as the original warranty is for three years or less.
This is just a sampling of the full list of benefits.
About the Annual Fee
To be perfectly honest, the idea of a $550 annual fee boggles my mind. That’s just SO much.
It’s comparable to the American Express Centurion Card (that’s not the famous AMEX Black Card, with a $7,500 initiation fee and a $2,500 annual fee!).
But when you break down all of the benefits of the card, the annual fee looks fairly pedestrian.
You have the 50,000 Ultimate Rewards points bonus offer, which is worth ~$500 in gift cards or $750 when used in the Chase Ultimate Rewards travel portal, so your first year is effectively free.
But each year, you get:
- $300 annual travel credit – any travel purchases charged to your card are automatically reimbursed
- 3X points on travel and dining purchases and 1x everywhere else (after the reimbursement)
The $300 travel credit already drops the annual fee, which close to what other travel cards offer. When you add in 3X on travel and 3X on dining, which are 1-2X higher than most other cards, and the Chase Sapphire Reserve’s annual fee feels more typical than fantastic.
How Much Do You Spend?
This will help you understand if the reward structure can cover and exceed the rest of the fee. The reward structure of the card is generous at 3X on travel and 3X on dining, with 1X on everything else, with no cap. The benefit over most other cards is cashback bonus on travel and dining.
How much do you spend on those two categories?
If you’re using a budgeting tool like Mint or Personal Capital, you can look in your transactions and collect all the ones under the Travel and Restaurants category. Then do the math of how much 2X is worth to you.
If you don’t use a tool, and don’t have a good estimate, we can rely on population data to guess a little.
According to the Bureau of Labor Statistics Consumer Expenditure Surveys, the average family spends $60,060 in a year. Of that, they spend $3,365 on food away from home, which we’ll take to mean spending at restaurants. That’s 5.6% of their total spending. How much do you spend in a year? Take 5% of that at restaurants and calculate it from there.
If you spend $3,000 at restaurants in a year, you’d get $30 in cash back from a typical 1% cashback credit card.
With the Chase Sapphire Reserve, you’d earn $90 in cash back (3X). If you spent those Chase Ultimate Rewards points on their portal, it’s worth 50% more. Your $90 in cashback is worth $135. That’s an increase of $105 over a regular cashback card.
You can do the same for travel, though remember it’s spending above $300 a year. The first $300 will be reimbursed back to you immediately.
Based on your spending, the extra 2% in those two categories could easily cover the rest of the annual fee. You also get auto rental collision damage waiver, trip cancellation/interruption insurance, and baggage delay insurance.
Don’t Want to Pay $550?
The Chase Sapphire Preferred Card is a solid alternative if the high annual fee is a turn-off.
You still get 60,000 Ultimate Rewards points after you spend $4,000 in purchases within the first three months, plus up to $50 in statement credits towards grocery store purchases. It’s worth even more towards travel when you use the Chase Ultimate Rewards portal where you get a 25% bonus, rather than the 50% bonus of the Chase Sapphire Reserve Card.
You will also earn 2x points on dining and travel, 2x total points on up to $1,000 in grocery store purchases per month from 11/1/2020 to 4/30/21, 1x on everything else.
You won’t get the $300 travel credit and the annual fee is $95.
Should I Apply?
That’s up to you!
You know how much you spend and the financials should indicate whether this card is a good one for you. If so, it’s just a matter of knowing if your credit score is solid enough (you can check with these tools) and applying.
Make sure that you don’t run afoul of any of Chase’s application rules, like the 5/24 rule. 5/24 is a hard rule that you can’t work around – you can’t have opened than five credit cards in the past 24 months.
This way if you aren’t approved, you can call the Chase reconsideration line without worrying it’s an unwinnable situation.