But is it the best option for your wallet?
The Chase Sapphire Preferred offers a tempting welcome bonus and has some full-time perks that make many people happy to pay an annual fee to use it. But to maximize the value, you’ll need to do more than a minimal amount of traveling each year.
In this article, I’ll take a look at the merits of this card to help you figure out if it’s worth it to you.
Table of Contents
- What Is the Chase Sapphire Preferred?
- Chase Sapphire Preferred Credit Card: Specs and Perks
- Is the Chase Sapphire Preferred Worth the Annual Fee?
- Chase Sapphire Preferred: Pros and Cons
I’ve compared the Chase Sapphire Preferred to the best cards in those segments of the market. And I’ve determined that it’s a viable choice because of its strong rewards program, which is built primarily around travel and dining spending.
As you’re deciding whether this card is a good fit for your wallet, please use this review in conjunction with Clark Howard’s 7 Rules for Using Credit Cards.
What Is the Chase Sapphire Preferred?
The Chase Sapphire Preferred is a rewards credit card that offers premium perks in exchange for an annual fee.
The rewards for this card, given out as Chase Ultimate Rewards points, are focused on travel and dining spending. So they’re worth more if you redeem them to make new travel purchases through Chase.
This card is a popular choice for people looking for a travel credit card that’s not tied to a specific hotel or airline.
(Note that this card is different from the Chase Sapphire Reserve card. It carries a $550 annual fee and offers a similar but potentially more lucrative version of the rewards program offered with this card.)
Chase Sapphire Preferred Credit Card: Specs and Perks
Let’s take a look at the fine print to examine some of the card’s perks and drawbacks.
Chase rewards all types of spending with this card via Chase Ultimate Rewards points, but the best use of the card is for spending on travel and dining thanks to bonus multipliers for those spending categories.
Here’s a quick breakdown of the points system for purchases made with the Sapphire Preferred.
|Spending Category||Points Value||Qualifying Purchases|
|Travel||2 points per dollar spent||Transactions with airlines, hotels, motels, timeshares, car rental agencies, cruise lines, travel agencies, discount travel sites, campgrounds and operators of passenger trains, buses, taxis, limousines, ferries, toll bridges and highways, parking lots and garages.|
|Dining||2 points per dollar spent||Dining at restaurants (worldwide) including eligible delivery services and takeout|
|All other purchases||1 point per dollar spent||All other transactions excluding items such as balance transfers, cash advances, lottery tickets, casino gaming chips, race track wagers or similar betting transactions|
Rewards Redemption Rules
You can convert Chase Ultimate Rewards points into a reward of your choice such as a statement credit or a free night at a hotel.
This is where you need to pay close attention, because your decisions on how you convert your points have a direct impact on their actual monetary value.
Chase says you have the following options for redeeming your points:
- Statement credits
- Gift cards
- Transfer of points to participating airline and hotel rewards programs
- Use of points to pay for products or services made available through the Ultimate Rewards program or directly from third-party merchants
The points conversion rates for each of these methods vary and are sometimes affected by temporary promotional offers. But generally speaking, each point is worth about a penny.
Two areas where you can maximize the value:
- Redeeming your points for travel through the Chase Ultimate Rewards program. You get a 25% bonus in the redemption rate here. For example, you can redeem 100,000 rewards points for $1,250 worth of travel. That’s an effective value of 1.25 cents per point.
- Use the “Pay Yourself Back” program. This is another opportunity to get a 25% bonus in redemption rate by using your points to claim a statement credit in a certain spending category. These categories rotate, so you’ll have to be strategic. For example, if Chase is offering this deal on grocery store spending, you could get a statement credit of $125 for $1,000 in grocery spending.
Other Cardholder Benefits
- 100,000 Point Welcome Bonus Opportunity: New cardholders earn 100,000 bonus points if they spend at least $4,000 with the card in the first three months they have the card. As cited above, that could be worth up to $1,250 in travel booked through the Chase Ultimate Rewards program.
- 1-for-1 Point Transfers to Popular Travel Programs: It’s worth pointing out just how convientent this points transfer option can be. Popular hotel partners include Marriott, Hyatt and IHG. Airline partners include Southwest, United, JetBlue and British Airways. You can simply transfer points from your credit card to the partners’ rewards programs to supplement your balance.
- Travel Insurance Perks: One of the more impressive things about this card is the collection of travel protection benefits you’ll receive. This includes auto rental collision damage waiver insurance, trip cancellation insurance for things like sickness or severe weather, as well as baggage delay and trip delay coverages. In order to unlock these perks, you’ll need to use this credit card for the related transactions.
- Purchase Protection and Extended Warranties: Cardholders also get protections on everyday purchases made with the card including purchase protection against damage and theft on new items (up to $500 per item) for 120 days after purchase. Using the card for purchase also will extend the manufacturer’s warranty for an additional year on items that have a warranty period of three years or less.
- DoorDash and Lyft Perks: Cardholders can get a $0 delivery fees for a year with DoorDash and earn 5x points on Lyft rides through March 2022.
Here’s a quick look at some of the fees the Chase Sapphire Preferred card carries:
- Annual Fee: $95
- Balance Transfer Fee: Either $5 or 5% of the amount of each transfer, whichever is greater
- Cash Advance Fee: Either $10 or 5% of the amount of each transaction, whichever is greater
- Foreign Transaction Fee: None
- Late Payment Fee: Up to $40
Is the Chase Sapphire Preferred Worth the Annual Fee?
Typically, Team Clark recommends that you default to a no-annual-fee credit card for your everyday spender to ensure that you’re never “chasing benefits” to justify the yearly cost of your credit card.
But there are some cards with annual fees that can easily pay you back for the annual fee if you use the perks wisely.
This card falls into that category, presuming that you use it for travel, dining and purchases in need of warranty protection.
Let’s look at what it would take for you to cover the annual costs of this card through your travel and dining spending alone.
Annual Travel and Dining Spending Example
Let’s assume that you use the card primarily on spending for your rewards bonus on travel and dining spending.
It would take you a combined $4,750 in spending in those categories each year to return $95 worth of rewards points (redeemed at the regular redemption rate).
However, if you redeemed your points for travel or another category through the “Pay Yourself Back” program, you’d need to spend only $3,800 on dining and travel per year to cover your $95 annual fee with.
Here’s a look at how much your annual spending could be worth based on either 1x or 1.25x redemption methods:
|Annual Travel/Dining Spending||Rewards Points Earned||1x Value Redemption||1.25x Value Redemption|
By mentally clearing the annual fee each year via rewards on travel and dining spending, you’re freeing yourself up to enjoy the rest of the perks and rewards “free of charge.”
Chase Sapphire Preferred vs. 2% Cash Back Credit Cards
As a general piece of advice, Team Clark points consumers to 2% cash back credit cards for everyday purchases. These no-annual-fee cards are an easy way to assure yourself a steady return on almost every purchase you make.
You may be wondering if using the Chase Sapphire Preferred is a better option than simply sticking with the 2% you earn with a cash back card for your travel purchases.
The answer likely is going to rely on these factors:
- How much do you spend on dining and travel each year? Using the theory that the base value of a reward point is a penny, these are the only two categories in which you’ll match the 2% rewards of a cash back card on spending alone.
- And are you willing to use those rewards to spend on travel through Chase? That’s your best chance to beat the 2% of a cash back card. You’ll meet it on the bonus points from purchases and then surpass the value with the 1.25x redemption rate.
- All other spending categories are going to be worth twice as much in cash rewards if you use the 2% card instead of the effective 1% return from the Chase Sapphire Preferred.
- How much value do you place on the travel protections offered by this card? While some 2% cash back cards offer similar perks, none of them will offer the variety of policies that this travel card affords you as a member.
Chase Sapphire Preferred: Pros and Cons
|Bonus rewards and redemption methods for travel||Non-travel and dining purchases have a low rewards return|
|Protections and warranties on auto rentals, select purchases and travel reservations||Redemption for non-travel rewards may result in an effective 1% return on purchases|
|1-for-1 points transfer program allows you flexibility for redeeming rewards on travel||Annual fee means there’s a spending threshold you’ll need to surpass each year to make it worth it|
If you’re an avid traveler looking for a credit card that provides basic travel perks and doesn’t break your wallet with a huge annual fee, the Chase Sapphire Preferred card could be a good fit in your wallet.
Ideally, you could use it in conjunction with a no-annual-fee credit card that returns you 2% cash back rewards on everyday purchases.
That way you can take advantage of the Preferred card’s boost in travel rewards while also assuring that you get steady cash back returns on purchases made outside of the category.
Do you have the Chase Sapphire Preferred card? We’d love to hear about your experiences with it in the comments below!
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