Chase Sapphire Preferred – The “Ultimate” Overview

Background

In the last 3 years, Chase has really been beefing up the portfolio of Credit Cards they offer. For those of you that have been doing this for a couple of years,  know that Chase is really the go to Credit Card company for large credit card bonuses. Last years British Airways 100,000 mile sign on bonus being the most obvious example of this.

The Chase Sapphire Preferred was introduced in 2009, and laid low for a year until Chase beefed up the benefits and really started marketing the hell out of it. While Chase has many cash back, points, hotel, and airline credit cards, there never offered a Credit Card that allowed you to earn in all of those programs until the Sapphire.

From a strategic perspective and from a marketing perspective, the Sapphire Preferred is really a 100% attempt to chip away at American Express’s market share of affluent customers. The reason for this is because AMEX’s customers have a higher percentage of paying their bills on time and they spend more money on their cards, which in the Credit Card industry is the holy grail!

That being said, when Chase designed this card, they really pulled out all the stops to compete with the Starwood Preferred Guest American Express and the Membership Rewards credit cards like the Platinum and Gold  American Express cards.

Rewards Breakdown of The Chase Sapphire Preferred

The Chase Sapphire Preferred earn in points called Ultimate Rewards (UR).

For every $1 you spend on the card, you will get 1 UR point.

While I typically shun “points” because they often result in terrible transfer ratios like 100 points = 1 mile, Ultimate Rewards transfer at a 1:1 ratio.

Airline Miles

With Ultimate Rewards, you can transfer to the following airlines at a 1 UR point = 1 mile.

• United

• British Airway

• Korean Air

• Southwest Airlines

Like American Express’s Starwood Preferred Guest and Membership Rewards loyalty programs, what is cool about Ultimate Rewards Program is that you can let your points accumulate without having to commit to a single program.

If you are going on a trip, you can first look for your award flight on the various Ultimate Reward Partner airlines, and then once you find the flight you want, then you can transfer your miles to that program.

So for example if you looking for a flight on United and it is blacked out, instead of getting frustrated and having to pay out of pocket for a real ticket, you could instead go to BritishAirways.com (since they are a Ultimate Rewards Partner) and search for flights on American Airlines (which is a British Airways partner)! If you just had a traditional airline credit card like United Explorer from Chase, you would not be able to do this because all your miles would be stuck in a single program.

Hotel

Ultimate Rewards also allows you to convert UR points into hotel points at a 1:1 ratio with the following programs:

• The Ritz-Carlton Rewards

• Marriott Rewards

• Hyatt Gold Passport

• Priority Club

Similar to airline miles, the benefit of Ultimate Rewards is that you are not tied down to a specific loyalty program. If you need a hotel room and Marriott is blacked out, you can always check Priority Club or Hyatt. You could not do this with a traditional hotel credit card!

I personally have never redeemed Ultimate Rewards for hotels because I have so many SPG points. In my opinion, it is more valuable to transfer points into airline miles because you can typically get a higher value from the miles by redeeming for business and first class flights. However if you have a lot of airline miles already, then it might make sense to transfer some of your Ultimate Rewards into hotel points!

Bottom line is that it is good to have the option to redeem for hotel points, even if you never do!

Reimbursement

While many serious mile collectors will scoff at the idea of getting reimbursed with points, there are times where I think it makes sense.

Basically with reimbursement, you can book a revenue ticket on any airline or book a paid stay at any hotel, and pay with your credit card. After your flight or stay is complete, Chase will reimburse you with a statement credit at a 1 point = 1 cent ratio.

If you book through Chase’s Ultimate Rewards portal, 1 point = 1.25 cents, so 40,000 points from this sign up are worth $500!

When was the last time someone gave you $500 for free to spend on travel?

While typically I don’t recommend using the reimbursement feature on credit card, the times it does make sense are during peak holiday travel when prices are high and airlines black out dates for award tickets, or when prices are exceptionally low such as mistake fares.

For example, my family was going to visit my cousin in Paris for Thanksgiving last year, I had to work so I couldn’t fly out until the Wednesday before Thanksgiving when prices were high. I looked at mile options on United but everything was blacked out. It looked like I’d have to pay $800 for the ticket so I could go visit Paris for 3 days, until I remembered the reimbursement feature of the Sapphire Preferred.

I booked a paid ticket on United and charged the $800 to my Sapphire Preferred (for which I got 2X points on travel so 1,600 UR points). When I took the flight to Paris on United because it was a paid ticket, I earned 8,280 United miles, plus 25% elite bonus of 2080 United miles. Once I got back to the States, I submitted my claim to Chase and they took my 60,000 UR points and credited me with $600 towards my $800 flight. Although it did cost me 60,000 points and $200, it ended up saving me $600 and allowed me to earn about 11,960 United miles. So for $200, I got a flight to Europe and 12,000 free miles!!! Not a bad deal. If there was availability on United for an award ticket, I would have spent the normal 60,000 miles for an economy ticket, however I would not have earned any miles.

Benefits Breakdown Of The Chase Sapphire Preferred

The benefits of the Chase Sapphire Preferred is where Chase really stepped up its game and overtook most of the American Express cards!

2X Points On Travel and Dining

I don’t know about most people but from using Mint.com, I know that 90% of the money I spend on my credit card is food related. Either restaurants, bars, or groceries. While you don’t get 2X points on groceries, you do get 2X points at restaurants or “cafes” where they predominantly only sell alcohol.

Additionally, you also get 2X points on travel. Chase has been very generous in what they consider travel, and it isn’t just hotels and airplanes which of course are both included. They really consider anything that moves worthy of the travel designation. That includes public transit (to my surprise my $86 monthly Chicago Transit Authority pass netted me 172 UR points!), taxis, trains, and cruises all earn 2X POINTS!

There aren’t many other cards that offer such a great benefit of 2X points on either any type of travel or dining! In my personal opinion, to play catch up I think AMEX will introduce this feature to their Platinum and SPG card in the near future.

7% Annual Dividend

This benefit is really awesome but at the same time quite hilarious for 2 reasons.

First, the dividend also pertains to the sign up bonus! So in addition to the 40,000 point sign up bonus you receive, you will also get 7% back at the end of the year on that 40,000 point bonus plus on any spending you do. If you do the math, at a minimum that is 3,500 free points!

Second, what is even better is that when they specify “the end of the year”, they actually mean the end of the calendar year and not the end of your card membership year. So as you can imagine, many people signed up for the card this past November, and come Jan 1, 2012 they got a 7% dividend on their 40,000 point sign up bonus and most likely will never have to pay the annual fee if they chose to close it before November. Even if you applied today, you would still get your 7% dividend on Jan 1, 2013 and possibly not have to pay the annual fee!

I spent about $10,000 dollars on my Sapphire Preferred in 2011, so my 7% dividend in 2012 was based on the 40,000 point sign up bonus + $10,000 in 2011 spend = about 4,000 UR points. Not bad!

Real Customer Service

This feature Chase really didn’t have to include and the card would still be awesome, but it shows you how much effort Chase has invested in this card.

When you call the telephone number on the back of your credit card, instead of a robo-operator asking you to push numbers, a real person based in the U.S picks up right away. No waiting or anything. Prior to my Sapphire Preferred, I would use my Capital One card when I traveled abroad to avoid international transaction fees. I always hated having to call Capital One to tell them I was going abroad because it would take 20+ minutes. With Sapphire Preferred, it takes about 2 minutes which includes time to pick up the phone, dialing, and hang up. Amazing!

No Foreign Transaction Fees

Most people don’t know that if you use your card abroad, your credit card company that is always looking out for your best interest, will charge you a nice 3% foreign transaction fee for no real reason. Now here and there, it may not sound like a big deal, but if you are on vacation, saving money probably isn’t the first thing on your mind. Therefore you may spend a little tooooo much. When I went to Australia with my girlfriend and her family, her dad charged $17,000 in 1 week on his State Farm 1% Cash Back Credit Card. Unknown to him, this ended up costing him over $510 in foreign transaction fees! He has since learned his lesson and now has the Sapphire Preferred.

Being Mistaken For Someone Cool

I don’t know if this is really a benefit, however because the card is made of some weighted alloy, when handled by employees at restaurants and coffee shops, people who are unaware of the Sapphire Preferred seem to think it is some exclusive “black card”. I only point this out because of the irony of the situation, in which most of us have the card solely to earn miles for free travel!

Sign Up Bonus

Link To The Chase Sapphire Preferred 40,000 Point Offer

The current sign up bonus is for 40,000 points after you spend $3,000 in 3 months.

There is an annual fee of $95 for the card, however it is waived for the 1st year making the card essentially FREE. You can choose after the 1st year if you would like to keep the card, downgrade the card, or cancel the card.

As explained above, Ultimate Reward points can be transferred to numerous hotel and airline partners at a 1:1 ratio!

If you are not familiar with airline miles, with 45,710 UR points (40,000 sign up + 2,000 for minimum spend + 7% dividend), if you transferred those points to United at a 1:1 ratio, you would only be 3,290 miles short of a free economy trip to Europe on United. That economy ticket if purchased on Kayak.com would cost at a minimum $700+!

For domestic travel, you could transfer those 46,710 points to British Airways at a 1:1 ratio. British Airways is a partner of American, which would allow you to book 2 round trips economy from New York to Los Angeles on American Airlines.

My advice to families is that both spouses sign up for the Sapphire Preferred. This would net 113,420 UR points which would be more than enough to fly a family of 4 from anywhere in the United States to Disneyland for free on either United or British Airways (American Airlines). At a minimum, that would save you $1,000!

Questions

If anyone has any questions about anything in this post or about the Chase Sapphire Preferred, please feel 100% free to email me at FrequentFlyerUniversity@gmail.com! I love answering questions and helping beginners learn the ropes! There is no such thing as a dumb question!

Also if you are a beginner, feel free to check out The Beginners Guide I have put together to help you learn the ropes!

-Parag