This is yet another installment in my “Sliced Bread” series. First, the sign-up bonus of 60,000 points on Chase Ink Plus is very attractive, so no problem there. It’s “awesome sauce,” though, not the “awesomest sauce” because it was as high as 70,000 points in the past. Be careful because the minimum spend is quite high at $5,000 in 3 months.
This particular offer will end on March 1st and does pay me referral. Check inside the branch to see if they can waive the annual fee. You can qualify for this bonus as long as you haven’t received it in the last 24 months.
OK, sales pitch out of the way, phew! So, let’s say you get this card. The question arises: Should you keep it past the first year? Does this card justify $95 annual fee for a normal family? Many think it does, especially if paired up with Chase Freedom. What’s attractive about it is the fact that you can take advantage of 5% bonus categories on both cards, and transfer the points to programs like Southwest and Hyatt.
Many of my readers are fans of both programs, which is perfectly fine. I love Southwest too, and for 5,000 points per night for Category 1, many Hyatt properties are a good deal, especially during holidays. Still, I wanted to make a comparison. We will have two teams of cards. No battles, just a friendly debate this time:
1. Chase Ink Plus and Chase Freedom
Chase Ink Plus comes with $95 annual fee and earns 5 Ultimate Rewards points on gas, cable and office supplies purchases. It also earns 2 points on gas stations and hotels.
Chase Freedom earns 5 points in rotating categories, 1 point everywhere else.
2. Amex EveryDay Preferred and Sallie Mae Barclaycard (no longer available for new sign-ups, also see this post for reviews of all best long-term cards)
Amex earns 4.5 Membership Rewards points on groceries, 3 points on gas and 1.5 points on everything else. You have to make 30 transactions in order to get this payout. Annual fee is $95.
Sallie Mae earns 5% cash back on groceries and gas (on up to $250 in each category per month); 5% on book stores, including Amazon (on up to $750 per month).
One of the reasons folks like Chase Ink Plus is due to the fact that you can buy gift cards at office supply stores like Staples, and get 5 points per dollar. One of the best ways to leverage this is to stock up on Amazon and gas station gift cards, since you can rarely find a discount on those elsewhere. You can see a full list of gift cards and corresponding stores in this post on DansDeals
So, let’s assume that we have a large family who spends a lot on Amazon. Their imaginary budget breaks down like this:
1. Gas: $200 per month
2. Amazon: $300 per month
3. Dining: $300 per month (mostly fast food and Starbucks)
4. Groceries: $750 per month
5. Cell phone: $100 per month
6. Everything else: $350 per month
The total is $2,000 per month.
Let’s say the family is willing to purchase dining, gas and Amazon gift cards and don’t mind juggling two credit cards in their wallet on top of that. You can buy Visa gift cards at Staples, though only $200 denomination (with $6.95 fee). You can also buy Visa gift cards at some gas stations and get 3 points per dollar with Amex EveryDay Preferred.
But let’s assume they don’t want to go this route, and prefer to use credit cards for everything else. Both spouses are anal retentive and very conscientious of bonus categories and which card should be used for each and every purchase.
The rewards breakdown
We assume that they buy gas station, dining and Amazon gift cards at office supply stores in order to get 5 points per dollar, and maximize Freedom when it’s a bonus category.
Using Chase Ink Plus and Chase Freedom, you will get:
1. Gas: 12,000 Ultimate Rewards points.
2. Amazon: 18,000 points.
3. Dining: 18,000 points.
4. Groceries: 7,500 points from the first quarter; 7,500 from the rest of the year. Total of 15,000 points.
5. Cell phone: 6,000 points.
6. Everything else: 4,200 points.
Grand total: 73,200 points.
We will utilize Sallie Mae Barclaycard for gas, Amazon and $250 in grocery bills each month. Using Amex and Sallie Mae cards, you will get:
1. Gas: $120
2. Amazon: $180
3. Dining: Here is a small twist. You can buy Starbucks and many other restaurant gift cards at 10% off (or more) by searching Giftcardgranny
And here is another example:
So, assuming we use Amex and get 1.5 MR points per dollar, plus 10% off (conservative estimate), the total will be:
5,400 MR points, plus $360 we’ve saved on gift cards. Remember, when we use Chase Ink Plus, we are foregoing the 10% in savings.
4. Groceries: 27,000 MR points, plus $150 cash back with Sallie Mae.
5. Cell phone: 1,800 MR points ( we get 1.5 points per dollar with Amex)
6. Everything else: 6,300 MR points.
Grand total: $810 in cash back and 40,500 Membership Rewards points.
Assuming that you value MR and UR points equally (I do), you would essentially be trading $810 in cash back for 32,700 Ultimate Rewards points. Taking into account the fact that you can make up for Amex annual fee through various promos, the number is actually $905.
I’ve gotten over $100 worth of discounts on places like Walmart and Staples in one year, and that doesn’t even take into account Small Business Saturday promo that netted me $60 on just one Amex card. By that logic, you would be buying Ultimate Rewards points for 2.77 cents a piece.
That’s extremely steep and means that even a category 1 Hyatt will cost you $139 per night based on this logic. And that’s for their lowest tier redemption! I simply don’t find Hyatt option all that compelling, to be honest.
To be clear, I’m not talking about using points from your sign-up bonus, but rather devoting all of your credit card spending with the idea of getting “free” Hyatt stays. As you can see, they are far from free. One possible exception where it could make sense is if you plan to redeem during New Year’s Eve or other major holidays.
There is another compelling argument for Amex+Sallie Mae combo. You would only have to deal with gift cards for restaurants. Personally, I hate gift cards, especially for gas stations, so to me, this is a huge plus.
Of course, I’m not here to tell people which cards they should or shouldn’t use. I simply want to encourage everyone to do their own math and crunch the numbers to make sure they are getting optimal return on their credit card spending. Every point you earn has a cost associated with it.
The Devil cards’ advocate
Segment within a segment alert! If you have a Southwest Companion Pass and plan to leverage the heck out of it, you may want to stick with Chase Ink Plus/Freedom combo. That’s because every Ultimate Rewards point you transfer to Southwest will yield around 1.61 cents in flight credits (factoring in tax). Bringing companion will double it to 3.2 cents.
Incidentally, Southwest has just announced that you will no longer be guaranteed that fixed value for Wanna Get Away fares after April 17th. My guess is that international flights will get closer to 1 cent per point, especially during popular times.
Remember, awards to Caribbean and Mexico usually cost considerably more miles in traditional award programs. I would book those Southwest flights now if you had any plans to do so. Obscure routes to visit grandma will probably still yield the same value. Well, unless grandma lives in Los Cabos or Aruba.
Why did Southwest decide to introduce this dynamic (read “less transparent”) pricing? IMO you can thank the trifecta of Chase Ink Plus/Freedom card/Companion pass for that. Too many points+ too many free companions=devaluation.
At the moment, you can bring a friend for free with your pass, so you get 3.2 cents per point, which beats 2.77 cents by a decent margin. This scenario makes Ultimate Rewards program somewhat appealing.
Keep in mind, you can buy up to 60,000 Rapid Rewards points at a cost of 2.75 cents each. Plus Southwest runs sales on those fairly often. But if you don’t want to risk a rise in price, you may want to stick with “buying” your points via credit card rewards.
While Chase Ink Plus/Chase Freedom combo is superior to Chase Sapphire Preferred in terms of rewards, IMO it’s not the best fit for most regular families. The annual fee may not seem like a huge amount, but in ten years, it will add up to almost $1,000. That’s a potential vacation right there.
Additionally, cash is king. Points are valuable, but only to an extent. Don’t ever forget that when you collect them through your everyday spending, you are buying them with real money. Are you happy with the price you are paying?
Readers, what do you think of my analysis? Agree or disagree?
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