Jan 10 2017

Adding 2 more cards to our arsenal (and why I paid $450 for a credit card)

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My new cards: Starwood American Express and Chase Freedom

My husband’s new card: Chase Sapphire Reserve

I have nearly completed the minimum spend required to hit my 30,000 SPG bonus for my AmEx SPG card, and last week I shifted our focus to a new travel card for my husband.

Previously, for his work travel, he used the Chase Southwest Visa which offers bonus points on SW flights, and hotel & car rental partners. It is a decent card and has no foreign transaction fees, so that was the card we used in Canada. It will probably be time to dump the card before the annual fee hits this summer, in favor of his new card.

Chase Sapphire Reserve

Chase is offering an amazing 100,000 Ultimate Rewards sign-up bonus for its new card, the Chase Sapphire Reserve. It’s a card perfect for frequent or even occasional business travelers. You’d have to do the math if it is worth it for your situation. The sign-up bonus period is ending on January 11, so getting this card in his wallet was a big priority.

The annual fee is nuts: $450! Not waived in the first year! However, the perks will pay for the card and more:

  • $300 annual travel reimbursement. This has a broad definition, and we will easily get it. Bonus — as long as he has at least $300 in reimburseable travel expenses for work, that will essentially be paid by the card AND work. Drops the annual fee to $150, in essence.
  • $85 reimbursement for TSA Pre-Check. My husband already has this, so I’ll have him go with me to use his card so that I can also have pre-check. Our kids are all young enough that they can go with us in the pre-check line. I could opt for Global Entry instead, but I don’t know that we will utilize that. The credit card reimbursement for this is only once every 5 years, but this year it effectively reduces the annual fee to $65. Not so crazy now, right?
  • All Ultimate Rewards points are worth an extra 1.5x in the Ultimate Rewards portal. So, the 100,000 points bonus is worth $1,000 if redeemed for cash, but $1,500 in value in the portal. I can also transfer the points 1:1 to a variety of partners and potentially get even more value out of it. I see some great possibilities when transferring points to Southwest or Hyatt.
  • The card has some other perks: purchase protection, auto rental coverage, roadside assistance, trip cancellation/interruption insurance, etc. Certain airport lounge access. Discounts on rental cars from certain agencies.

You will have to do your own analysis, but for our spending patterns, this card will be worth keeping for the foreseeable future. For spending bonus, the card nets 3x points for every dollar spent on travel or on dining. Everything else is 1x. In the Ultimate Rewards portal, that is 4.5% back on travel and 1.5% on everything else (3*1.5; and 1*1.5).

Exploring the tremendous value of Chase Freedom

The bonus category this quarter is at gas station and certain transit. We don’t spend that much on gas, but I was able to buy a year’s worth of Netflix gift cards at a gas station and that counts.

To sweeten our bank of Ultimate Rewards, I went for the Chase Freedom card for myself. The sign-up bonus is only 15,000 points when you spend $500 in 3 months. Previously, the card just didn’t excite me, but that’s because I didn’t understand the potential value for this no-fee card.

15,000 is $150 back, or if you or your spouse has the Sapphire Reserve, that has a value of $150*1.5, or $225. Further, if you maximize the bonus categories each quarter, that boosts the 5% bonus earn to 7.5% on category spending. I won’t be able to hit it each quarter, but every bit is a huge boost. Non-bonus spending is 1%. If you maximized the $1,500 spend in bonus categories each quarter, you’d have 30,000 points and spend only $6,000. Follow my math here for the next point:

The Chase Freedom card bonus categories can have huge value when transferring to partners (which you can only do if you also have a premium UR card). For example, 30,000 points transferred to Southwest could get me 5 round-trip fares from Indianapolis to D.C. The cash rate would have been $120 each, or $600 total.

$600/30,000 points = $0.02 per point, HOWEVER, if these 30k points were earned by bonus spend on the Chase Freedom, that is in essence $600 benefit/$6,000 in spending, which is $0.10 per point. Nice!

Hyatt is a good transfer partner, especially for high cash-rate stays with relatively low point value redemptions. Example from DC:

A Hyatt could be had for 6,000 points per night +$75. The cash value of that particular stay would have been $1,414. If I subtract out the $375 cash needed for 5 nights, that leaves me with:

$1039/30,000 points which is $0.034 per point, but again if I earned those 30k points on Freedom bonus spend, that is $1039/$6000 = $0.173 per point.

Spend $6k in a year, get 5 nights at a nice hotel in a big city? Or, spend $6k, fly my family round-trip somewhere? OK! Comparing $6,000 in spend on my PNC Visa at 1.75% back, that is only $105. Compare $6,000 in spend redeemed for cash at 1% on the Freedom, and that is a mere $60.

The point rate will vary depending on location. If a cash rate is cheap enough, it might be worth it to just pay out of pocket, earn loyalty and credit card points for your stay, and bank them up for a more expensive trip.

Bottom line, Chase Freedom is absolutely a card worth having and keeping long-term.

After we hit the minimum spends on those cards and let some time elapse, I want to get the Chase Freedom Unlimited card. It is also a no-fee card and has 1.5% on all categories. This would be the go-to card for non-bonus spending. With 1.5*1.5, it is 2.25% back if redeemed in Chase Ultimate Rewards. I can also transfer those points to the Ultimate Rewards portal or to travel partners.

Before we get the Unlimited card, non-bonused spending will go on my AmEx SPG. With the Marriott/Starwood merger still playing out, it is hard to say for sure what will happen to the card or the points system. It is possible the card will go away or be grandfathered into a different card. I’m going to wait and see. In the meantime, I am calculating my earn rate at about $0.021-$0.03 depending on how I redeem those points.

The SPG points have a higher value if I were to book a cash+points redemption, but before deciding on a particular stay, it is best to do the math on paying the cash rate, full points, or cash+points.

 

 


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Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

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