The Chase Sapphire Reserve Card Is So Popular It Ran Out Of Itself
We all know that the Chase Sapphire Reserve is one of the hottest premium travel credit cards on the. Well, maybe not if you spent the last month under a rock, or you’ve been offline, waiting to connect to a dial-up service, but Nana Olaf is too busy chatting away on the landline about how you finally came to visit. Whatever the reason, all you need to know is that this card is rock solid.
A Quick Review
I do not have an affiliate relationship with Chase, so I have no reason to tout the Chase Sapphire Reserve (CSR) as the Second Coming. That said, I think this is the card to get if you are in the market for a premium travel card.
The Chase Sapphire Reserve, similar to the Chase Sapphire Preferred, is a travel reward credit card. It comes with a very generous sign-up offer of 100,000 Ultimate Rewards points (more on that later). It has an excellent $300 annual travel credit, earns 3x Ultimate Reward points on travel and restaurants and redeems Ultimate Rewards for 50% more value for airfare, hotels, car rentals and cruises. That is the short list that barely scratches the surface; there are a plethora of other benefits.
What about the Amex Platinum card? I don’t have a quick and easy answer. Both are comparable in some aspects such as legendary customer service 24/7, no foreign transaction fees, Global Entry or TSA Pre✓ credit and access to luxury hotels. The line between the two begins to get blurry after that. Here are some of the Amex Platinum offerings (my comments in italics):
- Complimentary Boingo access (this would be great to have on international travel)
- Hilton Gold status (I have this via the FoundersCard)
- Starwood Preferred Guest Gold (I only visit 1-2 times per year, Marriot and Hilton are my mainstays)
- Amex Offers (I use this through my Amex Everyday Preferred and Delta Platinum)
The CSR offers Priority Pass Select (which comes with the Citi Prestige), primary insurance on auto rentals, 50% more redemption, and more. Overall valuation depends on the user; Amex has a lot to offer, but I don’t much value from Membership Rewards, and the travel credit is very strict. That said, if my travel needs change I will take Amex up on their offer, but only when they offer the 100k sign-up bonus.
How Popular Is The Chase Sapphire Reserve?
It’s so popular it ran out of the luxury bonded metal cards that have become a signature of premium Chase credit cards. If you have in your possession or have seen the Chase Sapphire Preferred, you know it is a credit card with a bit of heft.
Chase approved “tens of thousands of applications” in the first two days, said spokeswoman Lauren Francis; the majority of the cards are going to millennials. And the bank didn’t have enough of the special cards—made with a proprietary mix of embedded metals—to meet the demand, so for the time being, it’s sending out regular plastic versions.Ben Steverman
Plastic? Did someone just say plastic? Has the War Department declared all metals to be used towards building more ships for the Pacific Fleet? All jokes aside, it’s good to know that Chase has the plan to get cards into customers hands. There might be a few that bemoan the fact that they will not be able to wave their Chase-branded ninja star around the restaurant like an upper-class pro, but those are the breaks.
The Chase Sapphire Reserve Popular? No Way! How Did Chase Not Know?
What confuses me is why the executives at JPMorgan Chase did not do their homework. I do not have a background in finance, but I knew the credit card would be fiercely fashionable long before the application page went live. Let’s look at its older brother, the Chase Sapphire Preferred. The ever-popular card comes with awesome customer service that is well worth the $95 annual fee. That’s not including the 2x Ultimate Rewards points on travel and dining, no foreign transaction fees and 1:1 transfer ratio to a myriad of travel partners. You can read more about the Chase Sapphire Preferred here (not an affiliate link). The card comes highly recommended for its value so how would Chase not think that a card with even more travel benefits would be less attractive? By the way, I am available for freelance analysis and consultancy work. Position, CPT Obvious.
100,000 Ultimate Rewards Points
Sorry folks, I am far from finished. Based on the statement from Mrs. Francis, Chase processed “tens of thousands of applications” successfully. Using just 10,000 applications, rough math translates into the following considering that the Average Ultimate Rewards Point is 2/$1 (3 for travel + 1 for other = 4 UR Points / 2 = 2 Average UR Points per dollar) and ~1.5 cents per UR Point ($1,500 / 100,000 UR Points = 0.015):
- 10,000 applications * $300 Travel Credit = $3,000,000.00
- 10,000 applications * 100,000 Ultimate Reward Points (Sign-Up Bonus) = 1,000,000,000 Ultimate Reward Points (Outstanding/Issued)
- 1,000,000,000 UR Points * 0.015 = $15,000,000 USD (UR Points average outstanding value)
- $15,000,000 + 3,000,000 = $18,000,000 per 10,000 activated CSR cards
In short, that is a lot of points and money Chase is spending to enter the premium card market. I am also going to make a few uneducated guesses since most of this data is locked up at corporate somewhere, but:
- Each activated card is worth $300 in cash and up to $1,500 in some form of rebate/point redemption
- Due to the calendar year not in line with the card year, there is the potential of an additional $300 redeemed before the first 12 months
- CSR will cannibalize the Chase Sapphire Preferred (CSP) segment – not sure number of applicants that avoid CSP or existing customers cancel CSP)
- ~70% of these cards will remain open 12 months (only half if this figure will retain the card)
- ~10% of cards activated will not meet the minimum spend requirement
- ~1% will fall into collection, and all points/benefits will be void
- The 5/24 rule will limit the number of card churners from abusing the product
- These benefits will not be sustainable if customers only carry the card for 12 months or less
- Customers may not know how to maximize their UR points using the portal
- Customers may not be aware that sometimes the UR Portal is not always the best deal
That is just off the top of my head. Now you see why the Visa Infinite benefits were scaled back. If you see anything I missed, let me know, and I will add it if it makes sense.
Future-Proof The Card, The Benefits
We all know that Chase is not afraid to cut the legs out from underneath its products. The CSP’s 3x UR First Friday benefit was cut as was the Chase Freedom 10% annual bonus. Citi has cut future applicants from receiving the Admirals Club benefit as well as modified the 4th-night free perk. When times were hard, the benefits flowed, but those days have passed.
The only way that Chase can lock-in these benefits is to reduce the bonus and offer the 100k as a special the same way Amex does for their platinum card, ensure customers keep the card longer than 12 months through great redemption practices and bonus point offers through spend, avoid churners and look for highly qualified spenders. Another option, at the risk of being ostracized by all 121 of my devoted readers, is to keep the flexibility of the travel credit, but lower it to $200, then add other benefits that are in line with the Amex Platinum, maybe Hilton or Marriott Gold. This assessment is not an invitation for Chase to copy cat, we have too much of that in the industry. They just need to understand that having a reliable and consistent program is key to a long-term customer, but it has to be sustainable or else there are going to be “tens of thousands” of customers who are going to become churners inadvertently.
It is great to see another premium card enter the market, and I hope the competition steps up their game. In the meantime, if you think you are ready, and you are not affected by the 5/24 rule, go for it. If you do not believe you will make use of all the benefits (completely possible due to a benefit overlap), try the Chase Sapphire Preferred. It has an easily-digestible $95 annual fee, waived the first year. Or, if you use hotels a lot, try the Citi Prestige fourth night free benefit.
What do you like most about the Chase Sapphire Reserve? Are you surprised they are sending traditional plastic cards instead of the bonded metal cards?
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