Is the Chase Sapphire Reserve credit card still worth it with a $550 annual fee? That’s a heck of a lot of money and a complicated question that involves a lot of factors, but don’t worry. I’m going to break it down for you and tell you exactly how much you need to spend each year for this credit card to make sense from the perspective of both a new card holder and those of you like me who are considering renewing.
How Chase Points Work
I’ve personally used the Chase Sapphire Reserve credit card since 2018, so let’s start with this and look at how my spending habits essentially earned me over $2,000 cash back during this time.
Not including the 50,000 point sign up bonus, I earned a total of 51,086 points back in 2018, of which, 22,041 were in the travel category.
Now just in case you’re new to the new world of Chase Ultimate Rewards, basicaically you get:
- 3 points for every $1 you spend on travel
- 3 points for every $1 you spend on dining
- 1 point for everything else
So that pretty much equates to 3% and 1% cash back for those categories.
In 2019, I earned a total of 57,598 points of which 36,587 were in the travel category. And finally in 2020, I earned 26,352 points where 15,257 were in the travel category.
So during the 3 years that I have used the Chase Sapphire Reserve credit card, I earned a total of 135,036 points and again this does not include the 50,000 bonus points that I received when I signed up.
These points are at a minimum worth $1,350.36 in cash, however, the true power of Chase Ultimate Rewards is realized when you redeem your points for travel.
Instead of 1 point equaling 1 cent, when you use your points to purchase let’s say a plane ticket, these 135,036 points are now worth 1.5 cents each. In other words, my points have a value of $2,025.54 when used for travel.
Keeping this in mind, this effectively means that if you use this credit card as a travel credit card, you essentially earn:
- 4.5% back on travel purchases
- 4.5% back on dining purchases
- 1.5% back fon every other kind of purchase
As you can see, the Chase Sapphire Reserve is indeed a travel credit card that rewards you when you spend on travel and dining expenses.
But What About the Annual Fee?
Now we can’t forget about the very substantial annual fee for this credit card.
Up until 2020, the annual fee for Chase Sapphire Reserve was $450, so over that time I was charged an enormous $1,350 in fees; however, each year you get a $300 travel credit, so if you spend at least $300 on travel every year, then your effectively only paying $150 for the annual fee.
We’ll talk about the fact that Chase has upped the annual fee to $550 in a second, but let’s finish my real-world example first.
So considering everything: the annual fee, the travel credit every year, and the effective 1.5x redemption rate for travel, I’ve realized a gain of $1,575.54 with the Chase Sapphire Reserve credit card over the course of 3 years based on my spending. Factoring in the additional 50,000 point sign up bonus, this equates to a profit of $2,325.54, just for using my credit card.
|Earned points||135,036 points x 1.5x||1||$2,025.54|
|Bonus points||50,000 points x 1.5x||1||$750|
Now how does this compare to a credit card like Citi Double Cash which earns you 2% cash back across the board?
Based on my same exact spending habits for those three years, I would have earned $1,516.94 with the Citi card.
Additional Benefits with Chase
Not only did Chase earn me more than Citi, but we haven’t even talked about any of the other benefits of the Sapphire Reserve credit card including:
- Priority Pass airport lounge access which I estimate has a value of around $400 per year
- Global Entry or TSA Precheck credit every four years worth up to $100
- Lyft Pink membership ($199 value, first year only)
- DashPass membership ($120 value, first year only)
- $100 DoorDash and Caviar credits (first year only)
- $120 Peloton Digital Membership credit (first year only)
I’m only mentioning these perks here to make you aware of them, but I don’t want to include them in the decision making process as I see them as just extra benefits.
So How Much Do You Have to Spend?
Let’s focus strictly on your ability to earn and redeem points, and now let’s also consider the new $550 annual fee.
During the last 3 years, I did a good amount of international travel, so it made perfect sense for me to have the Chase Sapphire Reserve credit card. But now that I’m back in the US and won’t be traveling as much, does it still make sense for me to have this credit card?
Here’s where we’ll take a look at how much, at a minimum, you must spend on this credit card each year for you to benefit from it. Let’s take a look at a few scenarios including a couple worst case situations.
1. No Travel Spend, but Travel Redemption
If you don’t spend on travel or dining but you plan to redeem your points for travel:
You need to spend a minimum of $16,966.66 each year in order to break even.
This of course assumes that none of your spending is in the travel or dining categories other than $300 to get the travel credit. By spending $16,666 on non-travel and non-dining categories, you will earn 16,666 points. When you redeem these points for travel at a 1.5x redemption rate, the points are worth $250. So when you subtract your $300 travel credit from your $550 annual fee, you end up netting zero.
2. No Travel Spend or Redemption
If you don’t spend on travel or dining and you choose not to redeem your points for travel:
You need to spend a minimum of $55,0000 each year in order to break even.
This again assumes that none of your spending is in the travel or dining categories. By spending $55,000 on non-travel and non-dining categories, you will earn 55,000 points. When you redeem these points at a 1x redemption rate, the points are worth $550 which nets zero when subtracted from the $550 annual fee.
3. Average Travel/Dining Spend with Travel Redemption
If you spend $3,000 on both travel and dining, $500/month on miscellaneous expenses, and you redeem your points for travel:
You need to spend a minimum of $12,300 each year in order to break even.
By spending $3,000 on travel (9,000 points), $3,000 on dining (9,000 points), and $6,000 on miscellaneous expenses (6,000 points) you will earn 24,000 total points. When you redeem these points at a 1.5x redemption rate, the points are worth $360 which nets $110 when subtracted from the $550 annual fee and $300 travel credit.
Going back to the Citi Double Cash card (which by the way does not have an annual fee), in this same scenario, you’d earn $240 cash back.
4. Ideal Spend with Travel Redemption
If you spend exclusively in the travel and dining categories combined each year and you redeem your points for travel:
You need to spend a minimum of $5,855.55 each year in order to break even.
By spending $5,555.55 in the travel and dining categories, you will earn 16,666 points. When you redeem these points at a 1.5x redemption rate, the points are worth $250. Subtract this from the $550 annual fee and consider the $300 travel credit, and you net zero.
Please note that any spend in any category in excess of this will result in profitability for the cardholder.
Is Chase Sapphire Reserve Worth It?
Considering the different scenarios above, I’d say it doesn’t make much sense for the average American to have the Chase Sapphire Reserve credit card. Unless you’re spending upwards of $5,855.55 on travel/dining every year, you are probably better off with a credit card that earns you a flat 2% cash back across all categories of spending like the Citi Double Cash card.
Alternatively, you can earn a $200 bonus with a Chase Freedom Unlimited or Chase Freedom Flex credit card when you sign up with my link 👉 https://www.referyourchasecard.com/18a/G77GW1QOQY. These cards have no annual fees.
Will I continue with my Chase Sapphire Reserve credit card? Unfortunately not this year, but as my need to travel in the future changes, I’m definitely open to reconsidering, especially when I become elegible for the welcome bonus again after 48 months.