Last year, I shared a post that laid out the history of my credit card rewards. The kind of rewards I’m talking about is signing up for a new credit card just for the free money. Back in June, I shared about signing up for the Chase Sapphire Preferred card, and at the time it was offering a 45,000 point bonus (and the first year annual fee of $95 was waived).
In order to get the 45,000 points, you had to spend $4,000 on the card in the first 3 months as a new card holder (this accounted for 40,000 of the bonus points). Then if you added an authorized user you would get an additional 5,000 bonus points (no cost to add an authorized user). The cash value for 45,000 points is $450…just for signing up and spending what we were already going to spend.
We ended up opening another one in my wife’s name and this time she added me as an authorized user. That was another $450.
This card was really the perfect card based on where a lot of our discretionary spending goes. It came with 2X points on all spending for dining and travel, and 1 point for every dollar spent on everything else. Over the past 16 months, we have received about $2,000 in cash back from cashing in our points.
My Next Move
Recently I found out about the new Chase Sapphire Reserve Card, which is really just a better more lucrative rewards card when compared to its predecessor the Sapphire Preferred.
The initial sign up bonus is 100,000 points or $1,000 in cash (as long as you spend $4,000 in first 3 months). And Chase really upped the ante by increasing the points to 3X for dollars spent on dining and travel. You still only get 1 point for all other spending. You also get a statement credit of $300/year for travel related expenses.
So, what is the catch?
Well, it comes with a $450 annual fee. But if you take a step back and put this in perspective with the $300/year statement credit you get, it is really only $150/year or $55 more than the Sapphire Preferred. Over the past 12 months, we have spent approximately $24,000 on dining and travel and should continue at this pace for the indefinite future.
Based on the 3X points for these categories, that is an additional 24,000 points of $240/year if redeemed for cash (compared to the 2X points we are currently receiving). So, even with the additional $55/year, we still come out ahead by $185 (in year 2 and beyond). Due to the signup bonus, we will end up netting $1,090 in the first year, just for signing up for the card and replacing the spending we were previously using Sapphire Preferred card for.
Here is the math:
$1,000 sign up bonus (100,000 points redeemed for cash)
$300 statement credit (on travel related expenses like airfare, hotels, Uber, etc.)
$240 in extra points due to 3X point structure
Less $450 annual fee (unfortunately not waived in the first year)
Net Cash Benefit = $1,090
As soon as we hit the spending minimum we will be applying for the same card in my wife’s name. This should happen sometime in late November. That will be another $1,090 in free money for a total of $2,180 just for switching the card we are currently using. The question is whether we keep either of them open. We will for sure close one before the annual fee renews, but we will have to decide if we want to cancel both and just go back to using our Sapphire Preferred.
The reason why this is even a thought is due to the fact that the Reserve card charges $75 for an authorized user, where the Preferred does not. That said, there is still room in the additional $240 in additional points that would cover the $75 and still add incremental benefit. Why the $75 fee for an authorized user?
Chase charges the $75 fee due to the access to over 900 airport lounges that come with the card (the $450 only covers one person). So, essentially you are paying for the additional card user to have access to the lounges.
However, there is another benefit worth $100, and that is up to $100 application fee credit for Global Entry or TSA Pre check. This is something my wife and I had considered doing in the past but wasn’t sure if it was worth it.
There you have it, my latest credit card sign up.
Note: Since writing this (yes, there is a delay in what I write and when it gets published), I have since cashed in 116,942 points for $1,169.42 in cash (see screenshot below):
In addition to this cash redemption, I have also received $600 in statement credits. You may remember, I said this card came with an annual $300/year statement credit. One of the advantages of signing up for this card at the end of the year is that you can get one for 2016 and one for 2017 before you are ever charged another annual fee:
I got my Chase Sapphire Reserve card back in October and then we applied for one in my wife’s name in November. We have since hit the $4,000 spending requirement for an additional 100,000 point bonus and have also earned another $600 in statement credits. You will see in the screenshot below that we currently have 5,522 points, with another 102,618 coming through on the next statement. We have a transaction pending that will get us the additional $177 to hit our second $300 statement credit for this card.
When everything is said and done we will have cashed out $3,450.82 when you consider $1,200 worth of statement credits between the two cards, $1,169.42 that I’ve already redeemed, and the pending value of my wife’s points of $1,081.40. All of this for about 5 minutes of our time per credit card application.
Net of the $450 annual fee ($900 for both cards) we made a cool $2,550.82. That is an effective hourly rate of ~$15,305 or $32.8M per year.
Keep in mind if you are willing to spend a bit more time than this you could do even better with the points by using them to actually pay for travel related expenses. The points are worth 50% more when used to book travel through Chase.
Are you leaving free money on the table? I don’t care how much money I make, signing up for a credit card for this type of bonus is totally worth the 5 minutes it takes to get approved. And it’s for spending I was going to do anyway.
-Gen Y Finance Guy
Personal Capital allows you to aggregate your entire financial life into one account. All you need to do to see all your accounts in one place is log in to Personal Capital and voila! But it doesn’t stop there. They even automatically classify all your income and expenses for you. You get a FREE and fully AUTOMATED tracking system!