The one year anniversary has arrived for Chase’s blockbuster premium card; we break down whether it’s worth keeping once you’ve used the big bonus
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Rewards expert who writes the “Cashing In” reader Q&A column for CreditCards.com
It was one of the biggest reward card deals of 2016: an expensive new travel rewards card from Chase that offered a blockbuster 100,000 points plus a host of other benefits. Despite a $450 annual fee and virtually no advertising, the Chase Sapphire Reserve attracted so many applicants that the company ran out of metal to make the card within two weeks of its debut in late August 2016.
That was almost a year ago, which means that the tens of thousands of people who signed up for the card must soon decide whether to renew. Should they?
Ordinarily, there are compelling reasons to ditch premium travel reward cards after just a year.
Usually, the costs of the annual fee for a second year wind up being too high. They are high in the first year, too, but at least in most cases they come with generous sign-up bonuses that more than compensate for annual fees approaching $500. There might still be some reasons to hang onto a premium card for a second year – such as airport lounge access or generous category bonuses – but those tend to be less compelling than the big sign-up bonuses you receive initially.
With the Chase Sapphire Reserve, though, the bank has designed a premium card that can be compelling to keep for a second year and beyond.
In truth, Chase needs customers to hold onto the card longer than a year so that the card can be profitable. The bank spent a lot of money to lure customers with rewards, and it has to recoup that money over years, mostly from annual fees and customers’ spending.
“You expense the acquisition costs over 12 months. The benefit comes over seven years,” Chase CEO Jamie Dimon said in a July conference call, according to The Wall Street Journal. Typically, between 60 and 90 percent of premium credit card customers renew them, an analyst told the Journal.
Perks worth considering
Though the card’s annual fee is high, some cardholders facing a renewal decision might keep it because of the card’s annual $300 credit for travel spending: You pay for a travel expense on the card, and you’re reimbursed up to $300 a year. Because the year runs from December to December, people who received the card before December 2016 by now could have received $600 in credits before their second annual fee comes due.
If you regularly spend at least $300 on travel each year, then that travel credit effectively knocks down the annual fee to $150 – which is much more competitive with other travel rewards cards. Many competitors are in the $75-$100 range. While still a little pricier, the Sapphire Reserve’s category bonuses of triple points on travel and at restaurants can make up that difference – if you spend a lot on travel and eating out.
In addition, with the Chase Sapphire Reserve, you can redeem Ultimate Reward points for 1.5 cents per point, which is a ratio that makes redeeming on Chase’s travel portal attractive. By comparison, Chase’s Sapphire Preferred card’s annual fee is $95 a year (waived the first year), gives only double points on travel and at restaurants, and allows you to redeem for 1.25 cents per point. Your annual fee is lower, but so are your benefits.
The difference might be small enough to entice some cardholders to hang onto the Reserve for a second year. If you do, you might consider calling Chase to see if it is offering any retention offers, though the bank has a reputation for not offering those on its premium cards.
How to close without losing points
If you decide to ditch the Reserve, though, keep in mind that you’ll need another Chase card with Ultimate Rewards in order to retain any points you might have left. You can downgrade to a no-fee card or opt for the Chase Sapphire Preferred Card, which features a similar rewards and redemption structure at a more pragmatic annual fee of $95 (waived for the first year).
Also, if you plan to cancel, you have to do so close to your renewal date. Chase allows you to cancel within 30 days of the date the statement containing your annual fee closes to receive a full refund. So if your $450 fee is charged Sept. 8 and your statement closes Sept. 20, you have until Oct. 20 to cancel the card and receive a refund.
A better move is to make a quicker decision and to tell Chase you are canceling before the fee hits your statement. Otherwise, you might have to wait a couple of months for a check in the mail.
If you didn’t get in on the frenzy last year, you can still apply for the card. But Chase has dropped its eye-popping sign-up bonus to a more average level. The current offer is 50,000 points.