The long-circulating rumors are finally confirmed: The annual fee for the Chase Sapphire Reserve is increasing from $450 to $550, and Chase is adding some new benefits to the card to compensate for the fee hike.
The increase was effective for new cardholders on January 12. Existing cardholders will renew at the old $450 rate until April 1; after that, the new annual fee applies.
There are two new perks. First, there will be a DoorDash credit of $60 in both 2020 and 2021. This will be stacked on top of the DashPass membership, which normally costs $9.99 per month and includes lower service fees and free delivery on all orders over $12.
The other new benefit is a one-year membership in Lyft Pink, which costs $19.99 per month. It includes a 15% discount on all rides, scooter and bike rentals, as well as priority airport pickups. In addition, cardholders will earn 10 Ultimate Rewards points per dollar on rides paid for with the card.
These changes come as no surprise to industry observers. When the Sapphire Reserve was introduced in the fall of 2016, it quickly became the hot card to have—so much so that Chase ran out of metal cards during the launch and temporarily issued plastic versions. Part of the card’s appeal was the unprecedented signup bonus of 100,000 Ultimate Rewards points. On top of that, the Sapphire Reserve was loaded with benefits that made it an elite rewards card:
- An annual travel credit of $300;
- Priority Pass Select membership;
- Triple points on dining and travel worldwide;
- Primary auto rental collision coverage;
- A $100 statement credit every four years for Global Entry or TSA PreCheck;
- No foreign transaction fees;
- Trip cancellation and interruption insurance, trip delay reimbursement, and baggage delay insurance and lost luggage reimbursement.
The Sapphire Reserve also became the favorite card of upwardly mobile millennials, and it was credited with attracting a new generation to the points and miles hobby. It started an arms race of sorts within the industry and put pressure on American Express to up their game.
However, the card was never profitable according to Chase’s own filings. Chairman Jamie Dimon said the company’s loss would be “$200 million or $300 million” in the first quarter, and he admitted it would take between five and seven years to recoup the revenue. Part of the problem was traceable to the card’s demographics. Chase revealed that cardholders had an average FICO score of 785, an average annual income of $180,000 and an average sales volume of $39,000. This meant they were far more likely to pay their balance in full each month and not accumulate costly interest charges.
Most observers seem to feel that the new benefits are being funded largely by DoorDash and Lyft, and that the increased annual fee will go a long way toward making the Sapphire Reserve a viable financial product for Chase (the signup bonus was reduced to 50,000 points long ago). The big question, of course, is how many cardholders will cancel or downgrade their card in a product change.
So, Should You Renew?
If you have the Sapphire Reserve, should you renew and pay an increased annual fee of 22%? The key factors are your travel and dining patterns, as well as which other premium rewards cards you currently have in your wallet. Let’s look at the situation in detail:
The Sapphire Reserve earns three points per dollar on both dining and travel, which was a compelling combination when the card was first released. Now, however, there is competition. The newly refreshed American Express Green card also offers triple points on both dining and travel, for an annual fee of $150 (the Sapphire Reserve fee will net to $250 after the travel credit is applied). The personal Amex Gold offers four points on dining worldwide. Ink Business Preferred from Chase gives you triple points on travel, with a higher signup bonus of 80,000 points, and The Platinum Card from American Express earns five points per dollar on airfare (Amex points are at least as valuable as Chase points).
The Sapphire Reserve Priority Pass benefit can still be used at participating airport restaurants, which is no longer the case with American Express. However, the Amex Platinum card grants access to Airspace, Escape and Plaza Premium lounges, Delta lounges (when flying Delta the same day), and the proprietary collection of Centurion lounges. The usefulness of the DoorDash and Lyft benefits will obviously vary from one person to another.
Ultimately, your decision will probably come down to how many premium rewards cards you already have and how much you’re willing to pay in annual fees. Personally, I plan on downgrading to the Sapphire Preferred when renewal time rolls around. The Ultimate Rewards points are worthless when redeeming them through the Chase Travel Portal (1.25 cents apiece for the Preferred, vs. 1.5 cents for the Reserve), but I’m not doing that—I’m using the points for transfers to Hyatt or airline partners. As always, your mileage will vary.
Source: frugal travel guy