If you read our review of the Chase Sapphire Reserve card and are still apprehensive about the $450 annual fee, then perhaps the Chase Sapphire Preferred card is a better option for you. With an annual fee of $95 that kicks in during your second year and a 50,000 point sign up bonus, this card offers slightly less in terms of rewards for a less intimidating annual fee. We’ve both used this card in the past, and managed to rack up enough points to book multiple flights, car rentals and hotels in a short amount of time. While we’d still consider the Reserve to be the best premium card on the market, the Preferred card is probably your best bet for a mid-tier travel card.
- 50,000 point sign-up bonus once you spend $4,000 in the first three months.These points have a value of $625 when redeemed for flights, car rentals, or hotels through Chase Ultimate Rewards.
- No foreign transaction fees.
- 2 points earned for every dollar spent on travel or dining.
- 1 point earned for every dollar spent on all other purchases.
Even if you never used this card again after the first three months, the $625 bonus would cover six and a half years of the annual fee (7.5 considering there’s no annual fee year 1). That’s a compelling case in itself. If you really wanted to, you could sign up for the card, earn the sign up bonus, and then roll it into a no annual fee Chase Freedom card and pocket the $625 before ever having to pay an annual fee. But let’s just assume you actually plan to use this as your primary credit card. The value of each point is 1.25 cents when used to book travel through Chase Ultimate Rewards, so in order to offset your annual fee, you’d need to accumulate at least 7,600 points per year. Here are a few ways to do that:
- Spend $633/month exclusively on non-dining/non-travel related purchases. This is the absolute most you would need to spend to break even.
- Spend $317/month exclusively on dining and travel related purchases (these earn two points per dollar spent). This is the minimum you’d need to spend to break even.
Depending on how much you use the card for dining and travel, you could spend anywhere between $317 and $633/month in order to cover your annual fee. Obviously you’ll want to do more than just break even but those are the hurdles you’ll need to meet in order to get to the point where you’re earning a return on your annual fee on an ongoing basis.
Example: Let’s say you spend $2,000 per month on the card and it is split evenly among the three expense categories (travel, dining, other). This would equate to 40,000 points accumulated throughout the year which would be worth $500 towards travel, leaving you $405 in the money after netting out the $95 annual fee.
Comparison to Reserve
Whether you decide to sign up for the Preferred or the Reserve card will depend on your personal spending habits and on how freaked out you are by the sticker price of the Reserve card. It will also depend on how much value you ascribe to the ancillary benefits of the Reserve card such as airport lounge access and credit towards TSA Pre✓ or Global Entry. Maybe you already have Priority Pass and TSA Pre✓ so these benefits aren’t worth anything to you.
Even though the Reserve has a $450 annual fee, its effectively only $150 after you net out the $300 statement credit for travel related expenses (Preferred doesn’t have this). So now we’re really only comparing a $95 annual fee to a $150 annual fee. This evens the playing field considerably. Additionally, Reserve gives you 3x points for money spent on dining and travel rather than the 2x points that you get with Preferred. Of course the value of these extra points depends on the percentage of your monthly expenses that fall under these two categories, but you will almost certainly accumulate more points with Reserve than you will with Preferred based on this bonus differential. Finally, with Reserve, the redemption value of your points is higher (1.5 cents vs 1.25 cents). This can really start to add up as you accumulate points.
If your spending is distributed equally among travel/dining/other, then the Reserve card will always be your best choice. See the graph below for an illustration.
If for some reason you don’t spend any money on dining or travel, then the choice is less clear. But to be honest, if you spend literally zero dollars on dining and travel then you’re probably not in the market for a travel rewards card anyway. The below illustration is totally unrealistic but should give you an idea of where the break even point is between the two cards in this extreme scenario. The break even point between the two cards gets lower and lower the more you spend on the bonus categories.
For the majority of people, the Reserve is going to be the more attractive option even if it doesn’t necessarily seem like it because of the huge annual fee. If you still don’t feel comfortable shelling out that much each year for an annual fee, or if you don’t plan on spending much money on dining and travel each month, then the Preferred card is your next best option. It doesn’t have all the same perks as the Reserve but it still gives you a nice sign up bonus and it’s very reasonable to rack up hundreds of dollars of points each year that you can use for booking flights, hotels, and rental cars. If you’re in the market for a mid-tier travel card, then the Chase Sapphire Preferred is your best bet.