Today we’re going to be asking a question whether Sapphire reserved is good or not. So over the last few days, there have been some headlines that Chase is cutting 200 million dollars from the department that oversees the Sapphire Reserve. Apparently, the card is just costing chase too much money.
It won’t be profitable for at least five and a half years after its launch and the Sapphire Reserve is one year old this month. So why is the card costing so much money? You had that $100,000 point to be creative hundred thousand dollars been there. 100 thousand points sign up bonus, which was $1500 in value when booking travel through Chase, so it’s like giving every new cardholder free money and a strategy.
They didn’t have an advertising budget, they just gave this huge sign-up bonus and all the blogs, the credit card blogs like probably the biggest one. But there’s also Us credit card guide, all those websites that are reporting on credit cards, gave a lot of reporting time free advertising to the chapter to the Chase Sapphire Reserve.
And so a lot of people who signed up for the card will be readers of those blog. The only problem is that they advertised, it is basically through these blogs to the most among the people about credit cards. People who read the points are into the credit card points and mild game into maximizing benefits and rewards.
So you had all these people who are into maximizing benefits and rewards sign up for the card chase exceeded, its annual quota for new accounts within the first two weeks last year. When the card went public and they even ran out of the metal cards, you have all these people signing up, who aren’t keeping balances on their cards. So they’re not paying interest, because they’re maximizing points and miles.
They’re not the type of clientele who are going to go into debt on the car and that’s a big problem for Chase. Because it earns quite a lot of money through interest payments, in addition to things like the annual fee. That’s why the card hasn’t been making them much money and whilst they’re not bringing that much in through interest payments. They’re shelling out more than ever in terms of rewards.
In fact, the six biggest card issuers shelled out over twenty two billion dollars in rewards, such as travel air tickets, all this stuff in 2016, that’s over double what they did in 2010. So what is chase doing? This year we’ve already seen the sign up bonus cut from 100,000 points down to 50,000 points, so that cuts 750 dollars in value off the sign up bonus.
So they’re saving $750 on every new account, which is a great start of saving money. We’ve also seen the travel credit slightly tweaked in the way it’s applied, it is $300 every year from your cards anniversary originally. It was every calendar year, so the idea was that you can actually get it twice in your first year of membership.
If you apply for the card in August, you would get a $300 travel credit, which you could use and then when you got to January, when it’s a new year, you get another $300. So this way changing the way that’s applied, chase saves $300 in the first year of every new account. But these savings may or may not be enough.
So what could they do to the card in the future and what are they likely of doing in terms of cutting perks that could affect existing card members? First of all, you have a very generous unlimited guest policy on priority pass. I personally have taken free into pro departure lounges and paid no guests fees and they could cut that maybe match the Amex platinum in giving two guests for free.
Any guests after that I have to pay $27 C, because when you use your Priority Pass, chases being charged for that. So I’ve used it many times, I worked out, I would have paid two hundred and sixteen dollars just in guest fees. If I had to pay for a priority cost since the time, I’ve had the reserves less than one year ago.
So they could do that and then there’s also the travel credit. The Sapphire Reserve has the most generous travel credit, it’s just $300 Universal, you can use it for flights, Ubers, subways, or for anything travel related. So they could change the way that supplied, make it stricter.
For example, they could make it just air travel or reduce the amount, or take it down to two. If it was 250, just air travel, which would rival the city prestige or even down to 200. The AMEX Platinum’s credit is 200, and it seemed stricter.
So there is room for some adjustments to the travel credit while still maintaining a more generous travel credit. For example, the Alex Platinum still stays competitive. In addition, they could just start marketing the card to a new group of customers who are not so clued in as the readers of all these credit card blogs and who may actually maintain a balance on their card, thus paying some interest which would bring in some revenue purchase, so don’t go to shred your Chase Sapphire reserve after you can’t read anywhere get to the metal card. And there may be some changes coming perhaps, but I personally don’t think they’re going to be huge changes. I think Chase will try very hard to keep the card competitive and that three point earning rate on travel and dining is definitely worth it.
I think that won’t change fingers crossed, so what are your thoughts? Please leave your comments below and you have the chase Reserve which perks you would hope. Do not get cut if you are new, please subscribe for more credit card tips and tricks every week. And if you like this video, please give us thumbs up, I’ll see you next time.