The Chase Sapphire Reserve® Card has quickly become one of the most popular travel rewards credit cards in the US, despite having been introduced in the US market less than two years ago.
What makes this $450 annual fee card so great? It offers:
- A sign-up bonus of 50,000 Ultimate Rewards points after spending $4,000 within three months
- A $300 annual travel credit
- Triple points on dining and travel
- A Priority Pass membership with unlimited guesting privileges
- Fantastic travel and car rental protection
- The ability to redeem points for 1.5 cents each towards travel purchases
- A Global Entry fee credit every four years
- The ability to add authorized users for $75 each
The Chase Sapphire Reserve® Card is fantastic largely because it’s a $450 annual fee card for people who don’t usually pay $450 annual fees. This is the case because you get a $300 annual travel credit that will automatically be applied to any travel purchase, and Chase has a really broad definition of travel:
Merchants in the travel category include airlines, hotels, motels, timeshares, car rental agencies, cruise lines, travel agencies, discount travel sites, campgrounds and operators of passenger trains, buses, taxis, limousines, ferries, toll bridges and highways, and parking lots and garages.
This means that the first $300 you spend per year on the card for hotels, Ubers, taxis, flights, ferries, tolls, parking, etc., will be reimbursed.
When I talk about this benefit, I typically say that as long as you spend at least $300 per year on purchases in the travel category (which I assume a vast majority of people with this card do), your real “out of pocket” on the card is $150 per year. Yes, you do pay $450 upfront, but then over the course of the year you’d be reimbursed $300.
This brings me to a comment left by reader Jared on a post a couple of days ago:
Hey Lucky, I think saying the $450 annual fee is really only $150 because of the $300 travel credit is a little dishonest. I’m relatively new to the points game, and you certainly know more than I do, but as someone who has thought about upgrading to the CSR, I tried thinking through the cost of the card and if it’s worth it for me. I don’t travel as much as I would like, but the benefits of the CSR still sound really good. Here’s why I think it’s dishonest, and correct me if I’m wrong.
You pay the $450 annual fee regardless if you have spent on travel, so it’s a “sunk cost.”
You buy a cheap flight ticket and take an Uber to the airport, which totals $300, and the $300 credit kicks in to cover that.
$450 (spent on AF) + $300 (spent) – $300 (credit) = $450.
The $300 credit wipes out the travel spend, not deducts from the AF, so the real out of pocket is still $450 for the AF. I know other factors like the Global Entry fee and lounge access (which I would like to have) could factor into the lowering what would be considered the “real” out of pocket, but I think it still stands that the $300 only affects travel-spend on the card, not the annual fee.
Jared isn’t incorrect in his view, so maybe this is an important point to clarify, in case it’s confusing others as well. I think of everything in the miles & points world as having an opportunity cost, and my analysis of things is always based on what I would be spending in a particular category anyway.
The way Jared is looking at it, you pay a $450 annual fee, then you’re paying $300 for travel (which he views as a sunk cost), and then the $300 is reimbursed, so you’re still “out of pocket” $450. If you look at it that way, that’s accurate.
The way I view it, you pay a $450 annual fee, then you’d just spend $300 on travel that you would have spent anyway over the course of the year, and then you’re reimbursed $300. You paid the $450 annual fee, but you got a $300 discount on purchases you would have made anyway, meaning your real cost is $150.
That’s why I always add the disclaimer that this only applies if you’d spend $300 on travel anyway. I think almost everyone who has this card would naturally spend that much on travel annually, especially since it includes things like Ubers, taxis, parking, etc. You don’t even have to “travel” (in the traditional sense) to get value out of that credit.
So perhaps to make my statement as clear as possible: while the Chase Sapphire Reserve® has a $450 annual fee that you have to pay upfront, holding onto the card should really only cost you $150 per year, assuming you’d otherwise naturally spend $300 per year in categories that qualify as travel.