How much do you need to spend to break even with the Chase Sapphire Reserve?
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The Chase Sapphire Reserve is undoubtedly one of the best travel rewards credit cards. But deciding whether it makes financial sense for you to add it to or keep it in your wallet can be difficult. After all, the Chase Sapphire Reserve's benefits provide different value to each cardholder.
So, today I'll consider three different scenarios that may help you decide whether the Sapphire Reserve is a good choice for you. First, I'll compare the Chase Sapphire Reserve to the Chase Sapphire Preferred Card, a similar card with slightly less-rewarding bonus categories and a significantly lower annual fee (but with a higher welcome bonus).
Second, I'll compare the Chase Sapphire Reserve to the Citi® Double Cash Card, a card that earns up to 2% cash back on all purchases (1% when you buy and 1% as you pay) and doesn't charge an annual fee. Third, I'll look at how much you'd need to spend on the Chase Sapphire Reserve each year to cover the annual fee compared to using a non-earning card or cash.
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Assumptions for this analysis
Before we dive into this analysis, let's get a couple of notes and assumptions out of the way.
For starters, this analysis is looking solely at the return you'd get through spending rather than the other perks on the Sapphire Reserve (such as Priority Pass lounge access and travel protections). These are valuable benefits, but since every traveler would use these benefits differently, it's impossible to put an exact value on them. Assuming you'll get value from these benefits, your breakeven point will be lower than what's calculated in this guide.
Related: 4 things to do once you get your Chase Sapphire Reserve
Additionally, I won't be using the published $550 annual fee on the Chase Sapphire Reserve. As you're probably aware, this card offers an annual $300 travel credit that is automatically applied to eligible purchases. Fortunately, Chase uses an extensive definition for travel. Here's the complete list, as published on Chase's website:
"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."
I expect you spend at least $300 per year on these purchases if you're reading this post. And, since some cardholders are still grounded due to the coronavirus pandemic, Chase will also apply purchases at gas stations and grocery stores toward this credit through the end of 2021. So my analysis will consider the Chase Sapphire Reserve's effective annual fee to be $250 out of pocket.
Finally, I'm not going to include the limited-time DoorDash and Lyft Pink membership benefits or the new Peloton statement credits in this analysis. After all, these benefits may not provide significant value to some cardholders. Now, let's get started.
Related: Amex Platinum vs. Chase Sapphire Reserve: Which card is right for you?
Sapphire Reserve vs. Sapphire Preferred
To compare the Chase Sapphire Reserve to the Chase Sapphire Preferred, you must calculate a break-even point between the two cards. The Sapphire Reserve carries a higher annual fee, but also awards more bonus points for travel purchases and dining purchases. Because of the Sapphire Reserve's travel credit, I'll use these numbers for the effective annual fees:
- Sapphire Reserve: $250 ($550 minus the $300 travel credit)
- Sapphire Preferred: $95
This leaves a difference of $155.
But you also have to consider the bonus points. With the Chase Sapphire Reserve, you'll earn 3x points on travel worldwide (excluding purchases covered by the $300 travel credit), along with 3x points on dining at restaurants worldwide. The Chase Sapphire Preferred only awards 2x points for both of these categories. The calculations below are from TPG and not provided by the issuer.
If you use TPG's valuations
If you use TPG's valuation of Chase Ultimate Rewards points at 2 cents each, this means that you'll get an additional 2 cents of value for every dollar you spend on travel or dining out with the Sapphire Reserve as opposed to the Sapphire Preferred.
From here, the calculation is relatively straightforward:
Additional annual fee on Sapphire Reserve: $155
Value of points not earned due to Sapphire Reserve travel credit: $18
Value of additional points earned with Sapphire Reserve: 2 cents
Calculation: ($155 + $18) / $0.02 = $8,650
This means that if you spend at least $8,650 on travel and dining purchases in a year, you're better off going with the Chase Sapphire Reserve in terms of award earning. This breaks out to at least an average of $721 in spending per month.
Here are the calculations that prove the above calculation is correct:
Chase Sapphire Preferred:
$8,650 x 2 points per dollar = 17,300 Ultimate Rewards points
17,300 x 2 cents = $346
Chase Sapphire Reserve:
($8,650 - $300) x 3 points per dollar = 25,050 Ultimate Rewards points
25,050 x 2 cents = $501
At this spending level, earning 7,750 more Ultimate Rewards points on the Chase Sapphire Reserve will exactly cover the additional $155 annual fee. Note that these calculations assume that you get two cents per point of value from your Chase Ultimate Rewards points by transferring your Ultimate Rewards points to airline or hotel partners.
Related: Why do Chase and TPG list different values for Ultimate Rewards points?
If you book through the Chase travel portal
If you book travel through the Ultimate Rewards travel portal, you'll get a slightly different break-even point. After all, Chase Sapphire Reserve cardholders can redeem through the portal at a rate of 1.5 cents per point, whereas Chase Sapphire Preferred cardholders can only redeem at a rate of 1.25 cents per point.
So, if you plan to redeem your points by booking travel through the Ultimate Rewards travel portal, the calculation is as follows:
Additional annual fee on Sapphire Reserve: $155
Value of points not earned due to Sapphire Reserve travel credit: $13.50
Value of additional points earned with Sapphire Reserve: 2 cents
Calculation: ($155 + $13.50) / $0.02 = $8,425
This means that if you spend at least $8,425 on travel and dining purchases in a year and plan to redeem your points by booking travel through the Ultimate Rewards travel portal, you're better off going with the Sapphire Reserve. This breaks out to just $703 per month.
Related: Sapphire showdown: Chase Sapphire Preferred vs. Chase Sapphire Reserve
Sapphire Reserve vs. Citi Double Cash
Next, I'll consider the difference between the Chase Sapphire Reserve and a no-annual-fee cash-back card -- the Citi® Double Cash Card. The Citi Double Cash Card earns up to 2% cash back on all purchases: 1% when you buy and 1% when you pay your bill.
Related: How I use cash back — not just points and miles — to hit my travel goals
If you use TPG's valuations
Additional annual fee on Sapphire Reserve: $250
Value of points not earned due to Sapphire Reserve travel credit: $18
Value of additional points earned with Sapphire Reserve on travel and dining: 4 cents
Calculation: ($250 + $18) / $0.04 = $6,700
This means that if you spend at least $6,700 on travel and dining purchases in a year, you're better off going with the Sapphire Reserve. This breaks out to an average of $559 per month. Note that this calculation holds regardless of your spending in non-bonus categories, since both cards will earn an effective 2% return on spending in non-bonus categories.
Related: The best starter travel credit cards of 2021
If you book through the Chase travel portal
Additional annual fee on Sapphire Reserve: $250
Value of points not earned due to Sapphire Reserve travel credit: $13.50
Value of additional points earned with Sapphire Reserve on travel and dining: 2.5 cents
Calculation: ($250 + $13.50) / $0.025 = $10,540
This means that if you spend at least $10,540 on travel and dining purchases in a year, you're better off going with the Sapphire Reserve. This breaks out to $878 per month.
However, on non-bonus category spending, you'll be better off with the Citi Double Cash Card regardless of how much you spend in non-bonus categories. So, if you spend at least $10,540 on travel and dining purchases in a year, you'll want to carry the Sapphire Reserve for travel and dining and another card like the Citi Double Cash Card (or Chase Freedom Unlimited, which helps build the Chase trifecta or Chase quartet) to pay for non-bonus-category spending.
Related: These are the 11 best no-annual-fee credit cards for 2021
Sapphire Reserve vs. cash
The final part of the analysis will consider the difference between the Chase Sapphire Reserve and using a non-earning card or cash. This analysis is a bit more complicated because it depends on how much you spend in each purchase category. As a result, I'll split this further and look at how much you need to spend in both the bonus and non-bonus categories alone to cover the Sapphire Reserve's $250 effective annual fee.
If you use TPG's valuations
Travel and dining:
Points earned per dollar: 3
Value per point: 2 cents
Total rewards per dollar spent: 6 cents
$250 / $0.06 = $4,167
The Chase Sapphire Reserve's annual travel credit provides statement credits for $300 of travel purchases each year, but you won't earn Ultimate Rewards points on these purchases. So, if you spend $4,167 + $300 = $4,467 per year on travel and dining, you've already earned enough Ultimate Rewards points to cover the $250 effective annual fee. This works out to $373 per month.
Non-bonus spending:
Points earned per dollar: 1
Value per dollar spent: 2 cents
$250 / $0.02 = $12,500
Based on TPG's valuations, you'd need to spend $12,500 on the Sapphire Reserve on purchases outside the travel and dining categories to cover the $250 effective annual fee, which works out to roughly $1,042 per month. Plus, you'd still need to spend $300 in travel purchases annually to take full advantage of the $300 annual travel credit.
Related: How to get started earning rewards with your first credit card
If you book through the Chase travel portal
Travel and dining:
Points earned per dollar: 3
Value per point: 1.5 cents
Total rewards per dollar spent: 4.5 cents
$250 / $0.045 = $5,556
Even at the low end of the spectrum, you won't need to spend a ton of money in this category to cover the $250 effective annual fee, just $5,556 + $300 = $5,856. This comes out to $488 per month.
Non-bonus spending:
Points earned per dollar: 1
Value per dollar spent: 1.5 cents
$250 / $0.015 = $16,667
When you use the value of points when redeemed directly for travel, you'd need to spend $16,667 per year (or $1,388 per month) in non-bonus categories to cover the $250 effective fee. Plus, you'd still need to spend $300 in travel purchases (purchases at gas stations and grocery stores also count through the end of 2021) annually to take full advantage of the $300 travel credit.
Related: 4 reasons why you shouldn’t use your debit card
Calculating for your situation
Of course, it's likely that none of the above scenarios perfectly fits your situation. And, some of the Chase Sapphire Reserve's perks would likely provide value to you. So, you may want to calculate your break-even point for the Chase Sapphire Reserve. To do so, you'll need to consider:
- How much do you value the Sapphire Reserve's incremental benefits (such as travel protections and Peloton perks)?
- What cards would you use for travel, dining and everyday spending if you didn't use the Sapphire Reserve?
Then, you can use the same logic as I used throughout this article to calculate your break-even point. You'll likely find that your break-even point is lower than many of the scenarios I described in this article. And, of course, if you'd be a new Sapphire Reserve cardholder, you may also want to consider the value of the Sapphire Reserve's current sign-up bonus.
Related: How to assess and build your credit card portfolio
Bottom line
As you can see, the Chase Sapphire Reserve can make sense for many readers.
You may be a seasoned veteran when it comes to points and miles, so you may not think twice about applying for a card with a $550 published annual fee. But, even if you're new to this hobby, the Chase Sapphire Reserve card can be incredibly rewarding -- especially when you factor in the 60,000-point sign-up bonus after you spend $4,000 on purchases in the first three months from account opening.
Official application link: Chase Sapphire Reserve
Additional reporting by Nick Ewen.
