Should You Keep the Chase Sapphire Preferred Past the First Year?

The Chase Sapphire Preferred was the first miles/points credit card that I ever applied for. And I still recommend it as a great intro card for people looking to get into the miles and points game. The sign-up bonus of 40,000 Ultimate Rewards points and waived first-year annual fee is one of the best sign-up bonuses out there, and it’s a personal credit card, so you don’t need to pretend to have a business (which many people I’ve talked to are uncomfortable about). But should you keep the card around past year 1 and pay the $95 annual fee?

Overall, I think the Chase Sapphire Preferred is one of the most solid, well-rounded credit cards out there. Ultimate Rewards points are worth roughly 2 cents each to me because they can be transferred 1:1 to both United and Hyatt instantaneously (the instant transfer part is key so you don’t have to worry about losing award availability while waiting for the transfer to happen), and UR points are relatively easy to accumulate in meaningful quantities, so you actually have enough points to redeem for aspirational awards. This means that even on non-bonused spend, the CSP is roughly equivalent to a 2% cash back card for me (or that it’s about as good as you can get on non-bonused spend anyway; I know some people will disagree with this).

But the CSP also offers double points on dining and travel, which makes it better than pretty much any typical 2% cash back card for me. As I previously wrote, about 90% of my discretionary spending is spent on dining and travel, so I’m almost always getting 2x UR points on my spend. There are also no foreign transaction fees on this card (normally 3% on other credit cards), and it’s a VISA card which is widely accepted, so this is a card that accompanies me on nearly every trip.

Finally, the Chase Sapphire Preferred offers a large number of good credit card benefits that most people don’t know about. I detailed some of the recently enhanced benefits, but other useful things are trip delay insurance, trip cancellation insurance, baggage delay insurance, lost luggage insurance, return protection, and price protection. Because of these benefits, I generally prefer to pay for trips using my CSP over other credit cards, all else being equal.

So should you pay the annual fee? If you’re not actively involved in credit card applications (i.e. applying for multiple new cards every couple of months), and assuming a decent chunk of your spend is spent on dining and travel or internationally, then the Chase Sapphire Preferred is almost definitely worth a permanent place in your wallet. A break-even point for me would be around $5,000 of annual bonused spend: if you’re spending at least $5,000 a year on dining and travel or internationally (in which case you could save the typical 3% foreign transaction fee on most credit cards), then you’ll be getting an extra 5,000 Ultimate Rewards points per year, which should offset the $95 annual fee assuming a valuation of roughly 1 UR point = 2 cents. This is of course ignoring whatever annual fees you might have to pay for other 2% cash back cards or the Starwood Preferred Guest Amex card, in which case the break-even point might be lower (e.g. the CSP annual is only $30 incrementally more expensive than the SPG annual fee, but it’s also notoriously hard to get any sort of retention bonus for the CSP which isn’t true for the SPG).

For people who are churning credit cards regularly like myself, I think the decision is a little harder. The most bang for your spending buck that you get is for spending toward fulfilling credit card sign-up bonus minimum spend requirements. Thus, it’s entirely possible that you won’t have much spend going toward your Chase Sapphire Preferred, which means that the 2x categories and the no foreign transactions fees are meaningless. Furthermore, you could accumulate other credit cards which give similar benefits to replace the CSP. For example, the United MileagePlus Explorer Business card gets 2x miles on dining, and the Amex Premier Rewards Gold card gets 3x on airfare.

But the thing that ultimately made me pay my annual fee on the Chase Sapphire Preferred was the wonderful beast that is manufactured spending. Given a little bit of luck, it’s not unreasonable for me to manufacture $6,000 of spend per month at roughly 0.8 cents per dollar, which is more than enough to meet the minimum spend requirements of multiple credit cards every three months. Thus, I don’t actually end up diverting much bonused spend away from my Chase Sapphire Preferred, so I end up applying my first calculation to my situation: since I spend more than $5,000 annually on dining and travel and internationally, it’s worth it for me to pay the annual fee. Given the flexibility of Ultimate Reward points, the 7% annual dividend on UR points earned, and the bevy of credit card benefits, I prefer to put this bonused spend on my CSP over other credit cards that offer similar rewards (although to be fair, I don’t have an Amex PRG yet).

So this was a long and winding explanation of why I like the Chase Sapphire Preferred and why I personally kept it for a second year. Of course, YMMV. For what it’s worth, Chase is currently offering referral bonuses of 5,000 UR points for new applicants to the CSP, and I would of course appreciate it if you used my link to apply.

2 thoughts on “Should You Keep the Chase Sapphire Preferred Past the First Year?

    1. EfficientAsianMan

      I do $1,000 per month through Amazon Payments (zero cost). For the remaining $5,000, I buy Vanilla Reloads from CVS and load them onto my Bluebird card at a cost of $3.95 per $500. I say a little luck is involved because the CVS that I normally go to inconsistently stocks Vanilla Reload cards.

      Reply

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