Frequently Asked Questions
1. Sapphire Preferred or Reserved?
With the recent release of the Sapphire Reserved, there is little reason to consider the Preferred card. Even though the Reserved has an annual fee of $450, this is offset by the $300 annual travel credit. You can use this towards flights, hotels, rental cars, parking, or even Uber. This brings down the effective cost to $150/year–only $55 more than the Preferred card. The break even point at 2 cents/points is $2,750 when factoring in the 3x earning rate over the Preferred’s 2x rate on dining/travel. On top, the Reserve also offers additional benefits such as 1.5x redemption value towards travel over 1.25x for Preferred. Not to mention airport lounge access through Priority Pass and TSA Pre-Check reimbursement ($85).
One reason to still consider getting the Preferred card is for the 50k sign up bonus. You can then downgrade it to a regular Sapphire with no annual fee and then sign up for the Reserved card. This is a bit more effort, impact to credit, and another card counting against Chase’s 5/24 rule.
2. Ink Cash or Ink Preferred?
If going with the Chase “Quadfecta“, the recommendation is to go with the Ink Cash since it has no annual fee.
Similar with the Sapphire Preferred, you can still get the Ink Preferred card and then downgrade it later. Again the caveats are the extra effort, impact to credit, and another card counting against Chase’s 5/24 Rule.
3. What is Chase 5/24 rule?
Chase has a fairly strict policy when it comes to approving new accounts. If you opened 5 or more new credit accounts in the last 24 months, Chase will automatically decline your application for these cards. This is regardless of how good your credit score is. They do this to prevent customers who “churn and burn” through the cards just for the points. Some have found exceptions to this rule, with most having more luck by applying at a Chase branch.
4. How does the Chase Ultimate Rewards program compare to programs from Amex, Citi, etc.?
The programs are getting very competitive and it really comes down to which travel partners you prefer. However, the “Quadfecta” of cards offers a high earning capability, while the travel partners like Southwest and Hyatt offers one of the highest redemption values. This combination makes a strong point valuation overall that is hard to beat.
5. The rewards can’t all be free. Who pays for this?
We all do. Credit card companies typically make money in two ways: interest accrued on your debt balance and the transaction fees for every swipe. The first one can avoided by always paying off the full statement balance on time (else you negate the points your earn.) Transaction fees are more indirect. Merchants pay a network fee and transaction fee for every credit card transaction (e.g., $0.25 + 1.75%, and higher for certain reward cards). Using this rate, a $100 purchase will generate about $2 fees to the merchant. You the consumer, don’t pay it directly but merchants have to cover for this by slightly higher prices, or rely of the fact that consumers spend more at their store when using credit cards, especially reward cards.