Why The Chase Sapphire Reserve Doesn’t Really Cost You $450 Per Year

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The Chase Sapphire Reserve® Card has been incredibly popular since it was introduced about 18 months ago. The popularity far exceeded Chase’s expectations, and that’s because this is a $450 annual fee card that has become popular with people who don’t typically pay $450 annual fees. Most longtime readers probably get this, but for the rest of you, I think it’s worth talking specifically about why the Sapphire Reserve won’t really cost you $450 per year.

Yes, the card has a $450 annual fee. You’ll be billed that upfront, and it’s the cost to “buy-in” to perks like triple points on dining and travel, a Priority Pass membership with unlimited guesting privileges, amazing travel coverage, car rental coverage, and purchase protection, a Global Entry fee credit, the ability to redeem points for 1.5 cents each, and much more.

But the one biggest perk of the card that offsets the annual fee is the $300 annual travel credit. Because of how generous and easy to use this is, I consider the real out of pocket on the Chase Sapphire Reserve® Card to be $150 per year.

That’s because the annual travel credit is so easy to use that virtually anyone should be able to maximize it without effort. Here’s what you need to know about the credit:

  • You get one credit per cardmember year (a period that roughly coincides with when you’re charged the annual fee)
  • There’s no need to register, as the credit is automatically applied to any eligible purchases
  • You can apply the credit over however many purchases you’d like, so if you make one $300+ travel purchase that will knock out the credit, or if you make 30 $10 purchases, that works too

What surprises many people is what qualifies as travel. We’re not just talking about flights and hotels, but all kinds of other things as well, including:

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.

Things like taxis, Ubers, tolls, parking, trains, buses, and more, all qualify as travel. So much of what you even spend on a daily commute would be reimbursed.

While other cards have very specific requirements for their travel credits, the Chase Sapphire Reserve® Card has by far the easiest to use credit, to the point that I think it’s roughly worth face value. I’ve had some readers complain about the redemption process for credits offered by other cards, but I’ve never gotten a complaint about this credit. The way I view it, the real out of pocket on the card is $150.

Why does the Sapphire Reserve have a $450 annual fee, rather than just charging a $150 annual fee and not having a travel credit? There are two reasons, I suspect:

  • Credit card companies want as much “share of wallet” as possible, so by reimbursing you for certain types of spend, they know you’re most likely to keep their card in your wallet
  • Chase also offers the excellent Chase Sapphire Preferred® Card ($95 annual fee, waived the first year), and Chase doesn’t want to cannibalize that card too much, so the best way to avoid that is to offer two cards at very different price points, and especially to introduce something that competes with the other premium cards out there

What has your experience with the Chase Sapphire Reserve travel credit been?

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Comments

  1. Uber Codes as travel and is reimbursed.. that I knew. What I just noticed last week on my statement is that the first time I used Uber Eats? Coded as travel and reimbursed! I was surprised, but hey.. you could get $300 of delivery food using the credit if you wanted…

  2. Signed up for the Reserve almost as soon as it came out (Sept 2016) so based on the way they timed the annual credit, I got two credits within the first few months. The card had returned $600 by January 2017.

    Going forward, I see it as a $150 a year card. I would pay this even without the Global Entry credit and Priority Pass membership because the $55 difference between this and the Preferred is easily made up by the fact that Reserve pays 3x points on restaurants and travel (vs 2x on Preferred). I tend to get about 2.5 cents in value based on how I use my points so the break even for me (from a point perspective) versus the Preferred card is about $2200 of travel and restaurant spending.

  3. If you own or lease a commercial jet and need to enroll the aircraft and engines in the ICAO International Registry of Movable Assets, the registry and transaction fees count as “Travel” for the purpose of the credit. However, other ICAO transactions such as application fees for 3-letter designator codes for airlines do not.

    Don’t ask how I know this….

  4. I am about to hit my two year anniversary with the Sapphire Preferred and would like to drop it in favor of the Reserve before the annual fee kicks in for the preferred. I understand a product change would not allow me to take advantage of the 50k bonus though, right? But rather I would have to cancel the preferred and then apply for the Reserve. I would like a bit of advice on the best way to switch over cards. Thanks

  5. If you forget about the other perks and the 50% greater earning in travel and dining, just by charging $300 in travel to get the credit and redeeming 22,001 points in the travel portal you will come out ahead on the $55 greater annual fee. (22,001 x 0.0025 = $55.0025). Hmmm, why don’t I have this card? Oh yeah, I have the Preferred and I’ve been over 5/24 ever since. Maybe I’ll do a product upgrade anyway.

  6. Great post.

    This year, it took me just 10 days to put enough spending on the CSR that was considered ‘travel’ for me to earn the $300 credit. Note also that the $300 credit is real money on which one earns 900 UR points and, at the same time, one gets back to use to earn additional points on! It’s like double dipping because there is no associated ‘opportunity cost’. It thus could potentially be worth more than face value.

    By contrast, I did not use my $200 AMEX Biz Plat credit last year because it must be earned for incidentals on United, and as a United 1K/1MM/lifetime *G, (a) all big ticket items like extra baggage fee [paid last year on Bangkok Airways] are covered as elite perks, and (b) United’s Gift Registry to which I gifted myself $200 in prior years that counted as an incidental was taken down some time in early 2017 and it has been displaying this notice since:
    “We’re sorry, our gift registry page is currently unavailable for maintenance. You can still use the funds from your gift registry to book travel during this time, but you will not be able to receive contributions or update your registry details. We expect the page to be up and running again in early 2018.”

    So, maybe I will be able to claim the $200 AMEX Biz Plat credit in 2018, but the point is that one does not have to go through such hoops to earn the CSR’s $300 credit.

    The CSR: if you don’t got it, get it!

  7. @Tom:

    I think if you cancelled the Sapphire P, you’d still have to wait for 2 years before you can apply for the Sapphire R in order to get the bonus (Ben or someone else can confirm).
    If you have a partner or spouse, another option would be to sign them up in order to obtain the bonus and then you can merge your points subsequently.

  8. @ad The “one-bonus-per-two-years” clock starts ticking when the bonus is received (which may be a few months after the account was opened, depending on when you hit the minimum spend), not when the account is closed. So if @Tom opened his Sapphire Preferred account two years ago, he should be eligible for the Sapphire Reserve bonus soon. I was in the same situation. Since Chase won’t let you hold two Sapphire cards simultaneously, and I didn’t want to pay two annual fees anyway, I product changed my Sapphire Preferred to a no-fee Freedom card (after first using/transferring all of my UR points). I plan to apply for a Reserve next month when I fall under 5/24.

  9. Best card I have ever signed up for… Period! The benefits outweigh the fees tremendously! I travel a lot and the travel credit covers tolls so within a 2 week period I had my credit used. I had gotten it via a product upgrade from my Sapphire and even without the bonus it still pays off!

  10. @Lucky: Interesting choice of the cover photo. A Russian high speed train is probably one of the last places where this card would be used. Have you been on one of them?

  11. @lucky – Another point to your last question about why Chase charges a $450 annual fee when they give a $300 travel credit. When reporting revenue, the company reports $450 per cardholder, not $150. This isn’t because some people may not use the total credit, but the $450 is actual revenue while the $300 is a rebate, and rebates generally aren’t reported.

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