Both the Chase Sapphire Preferred and Reserve are great credit cards with different benefit levels. One of the key difference is the fee associated with each card. At the time of writing, the Chase Sapphire Preferred has an annual fee of $95 and the Chase Sapphire Reserve has a fee of $550. In 2019 , the fee was only $495 per year, but Chase increased the fee to $550 per year after 2020. Chase did also add more benefits with the fee increase. With the difference of $455, it is natural to ask which card to get and what the break even is.
There is no right answer because it depends on how you plan to use the card and how much you will be spending on it. Mostly, if you are a frequent traveller, the Reserve card should work better. So, let’s break down the numbers.
With the Chase Sapphire Reserve card, you get a bonus of 50,000 bonus points. When the Reserve card launched a few years back the sign up bonus was actually as high as 90,000 points. It used to be the better deal if you just focus on the initial sign up bonus, but it is now 10,000 bonus points short of the lower tier Preferred credit card.
However, the key is that it gives you a $300 travel credit every year. So, if you know you spend at least $300 on travel partners, that is pretty much a guarantee, which means your actual fee is $550-$300 = $250.
Factoring in the travel credit, the Chase Sapphire Reserve Card is still $250-$95 = $155 more than The Chase Sapphire Preferred Card.
To break-even, you then need to spend $x on dining and travel which earns you 3X bonus points on the Chase Sapphire Reserve Card vs 2X bonus points on Chase Sapphire Preferred Card.
At the exchange rate of 100 points for $1 in a gift card redemption,
3 X $x = 2 X $x + $155 X 100 points. Solving for x, you x = $15,500.
So, if you plan to be mostly redeeming points for gift cards and purchases which has the exchange rate of 100 points per $1, then the break even spending is $15,500 for travel and dining. In other words, if you are pretty sure you will spend $15,500 every year at least, then get the Chase Sapphire Reserve card.
However, if you will be redeeming your points mostly for travel via the Chase Travel Rewards website, then the breakeven can be lower since every point is worth 50% more with a Reserve Card vs 25% more with a Preferred card. Since this really depend on your overall spending and the allocation between the categories that have the bonus points (travel and dining), the calculation becomes more complicated.
Assuming all points are equal and you spent $0 on dining and travel (so no bonus points), then the break even point is an expected spend of $62000 per year before you breakeven on the difference of the fee.
1.5 X $x = 1.25 X $x + $155X100 . Solving for x, spending must be $62,000
On the extreme end, if you spend everything on dining and travel, then
3 X 1.5 X $x = 2 X 1.25 X $x + $155 X 100 . Solving for x again, spending on travel and dining only, the breakeven spending to recoup $155 is $7,750.
To sum it up, depending on the scenarios of spending level vs redemption method,
If you plan to redeem your rewards through the Chase Travel Reward website and can spend $7,750 per year , then get the Chase Sapphire Reserve Card.
If you plan to redeem your rewards for gift cards and regular purchase, but will not spend anything in the travel and dining category, then you need to spend as much as $62,000! before breaking even with the additional fees. Even worse, it sounds like you may not travel as much which means you may not even get the $300 travel bonus! Otherwise, the break even is $15,500.
Net, the Chase Sapphire Preferred vs Reserve break even point is between $7,500 – $62,000 depending on your travel & dining spending habits.