Why is Chase completely revamping their Sapphire Reserve card?
When Chase Sapphire Reserve launched in fall 2016, it took the credit card world by storm. The card offered a compelling value proposition: triple points on travel and dining, transfer points to travel partners or redeem them directly against paid travel at 1.5 cents per point, and unlimited Priority Pass airport lounge access. It came at a premium annual fee, but most of that was rebated in the form of a $300 travel credit.
Chase Sapphire Lounge, Washington Dulles
The product was wildly successful attracting young, affluent cardmembers. But it wasn’t profitable. Early on Chase filed SEC 8-Ks outlining greater than expected costs. My understanding is that in the first five years after launch they’d cumulatively lost around $2 billion on the product.
- On the one hand, that’s just a few hundred million a year which is more or less tipping money for J.P. Morgan.
- On the other hand, losses are likely even great than that since they paid more money to re-up United as a co-brand credit card partner early in order to ensure continued Ultimate Rewards points transfers to MileagePlus.
Chase Sapphire Lounge, Philadelphia
The problems, as I understand it, were that:
- People used the card far more for travel and dining (3x earn) than for unbonused spend (1x earn). They can make money at 1x and 2x (since not everyone redeems points at 1.5x through the travel portal or transfers them to Hyatt) but not 3x.
- Cardmembers skewed high income and they tended to pay off their bills every month, so Sapphire Reserve underperformed on revolve.
Chase was awarding too many points for the spend running through the card, those points were too expensive to redeem, and there wasn’t enough revenue to offset this – let alone make back the marketing expenses (like initial bonuses) required to acquire cardmembers.
So it appears that Chase set out to re-engineer the economics of the card.
- Earning: They’ll no longer offer 3x on all travel. That’s going to mean savings on some of the spend that cardmembers were doing with the product.
- Higher annual fee: This is revenue straight to the product P&L bottom line for every cardmember. And they justify it through merchant-funded offers. They’re giving partners like DoorDash, Lyft, and Southwest Airlines airlines access to their highly desirable customers. Those brands fund these rebates (at least in some proportion). Put another way, cardmembers pay more (higher annual fee) to be marketed to.
- Better integration of Chase’s travel ecosystem: Chase had been bonusing purchases from Booking.com and Expedia with 3 points per dollar spend, but those online travel agencies are increasingly Chase competitors. Chase says they’re now the number three travel booking platform. Cardmembers are being pushed to use Chase’s platform with 8x earn on all paid travel booked there, and they’ve taken away the 3x incentive for booking through Expedia (since only hotel and airline direct spend earns the new 4x multiple).
Meanwhile, they have their own internal ‘merchant-funded offer’ in the form of a credit for Chase’s own The Edit hotel portfolio. They’re driving customers to book premium hotels through their own platform, too. And The Shops at Chase has a credit, which is their online shopping platform.
- Lower redemption costs: Dropping 1.5x on all bookings through the Chase travel portal is going to help on the blended average cost of redemptions. First, because more travel portal bookings will be made at just 1 cent per point. And second because they’re negotiating direct deals that allow them to offer ‘up to 2 cents per point’ on curated redemption opportunities with hotels (that they’ve signed up with The Edit) and for air travel (where there’s enough negotiated margin). Those aren’t costing Chase the 1.5 or 2 cents apiece that cardmembers are getting, whereas the old 1.5x did come close to costing them for air travel.
- Incentivizing more (1x) spend: By adding a $75,000 spend threshold with benefits like IHG Diamond, Southwest A-List and more, customers have a target to shoot for giving Chase greater wallet share than just travel and dining spend which are in money-losing accelerator categories. They’ve structured the card to give consumers a reason to spend more in unbonused categories to reach this level. Plus, once they have these cardmembers in the portfolio, incremental spend is increasingly profitable.
Chef Nobu Learns Barbecue From Aaron Franklin, Thanks To Chase
Chase is delivering a lot of value with the new Sapphire Reserve product. I’m especially excited to use their The Edit credits in conjunction with PointsBoost redemption opportunities at 2 cents per point, while still earning hotel loyalty points and status credit at these same hotels, alongside both The Edit benefits and elite status benefits.
Alongside the other credits the card will offer, I’m going to get far more than the incrementally higher annual fee. And I’m going to be better off at 4x on air and hotel, while losing the rest of travel (like Uber). Plus I can book flights through their portal and earn 8x.
While the card is losing 1.5x travel portal redemptions (which are grandfathered for two years for existing cardmembers), I rarely used that option anyway.
- I avoided the portal because it meant dealing with an online travel agency for customer service when things went wrong. And it used to mean losing out on hotel points and status if booking hotels, but now The Edit portfolio solves this at participating properties (since those bookings receive points and status credit as well as elite benefits).
- I always transferred points to travel partners, and only for redemptions that were better than 1.5x.
- Now I will sometimes see 2 cent redemptions, and while it’s a matter of luck in some sense that’s okay – it’s like airline saver awards. You don’t always get outsized value, but the new system makes it possible to win more than before. I think of it as moving from fixed value redemptions back to a saver award chart.
Chase Points Are Better For Awards Than Paid Tickets
I did ask Chase executives about whether they were concerned about turning the product too much into a coupon book? American Express hasn’t pushed cardmembers away with their Entertainment Book-style Platinum card that forces cardmembers to jump through a lot of hoops to get enough value out of the product to justify its annual fee. But there’s a lot of frustration and fatigue. Chase contends that their credits are easy to use and already align with how their cardmembers behave. Plus, I’d add, the amount and value of the credits is really strong.
Ultimately they’re trying to get customers to lean in and give them more wallet share, both in terms of direct spend on the card and in terms of shifting their behavior onto Chase’s platforms in their travel and dining ecosystem. They’ve structured a lot of bonuses and credits as carrots to encourage this. I expect that a lot of Sapphire Reserve cardmembers (and potential cardmembers) will see the value, even if there’s a bit of chafing at a $795 annual fee and disappointment over loss in flexibility of 1.5 cent per point redemptions on all travel.
It would be great if you could publish a tutorial on the best ways to optimize the card. For instance I just learned now that I can book through Chase and still receive my Hyatt and Marriott elite benefits but I’ve never done that before because (unless I’m booking FHR) I book directly through the hotel websites.
I’m sure I am missing benefits on both Amex Plat and Chase Sapphire Reserve because they’ve made it so complicated.
Would love you to publish a helpful “how to”
I would say that IF CHASE COMMITTED that all The Edit (please rename it!) hotels always have points boost at 2% and the portal rates are the same as other OTPs then the card can be a no brainer for most who travel and like nicer hotels.
Gary, will they commit to this?
Well, well, well… if they filed 8-Ks, then everything they say must be true! I guess we’ll have to take Chase at their word, ignore reality, and say ‘thank you, sir, may I have another!’
@Wendy — Ah, for once, this IS a Wendy’s…
A milquetoast analysis that leaves out the state of luxury cards in general when the CSR was introduced. The last nine years have seen others surpass Chase, especially Amex at the high end. The card couldn’t make any money because the market walked right past Chase not long after it introduced the CSR.
Chase has needed to revamp this card since 2017, which is unfortunate timing for them. It proves that they didn’t understand the market, from both a rewards and competitive landscape perspective.
@Dave – I was told explicitly by Chase, “All hotels in The Edit program (1,100+) will be included in Points Boost with 2x the value, as well as thousands of additional top booked hotels through Chase Travel that will be boosted up to 2x the value.”
Everything you are saying happened and made the card unprofitable for Chase should have been KNOWN from the get go when they introduced the card! You can’t target high spend individuals with a card and not assume they are going to pay off their cards monthly and not carry balances. You also can’t assume that these individuals aren’t going to keep other cards that they will use for everyday spend or for categories that are getting higher earnings potential than on the CSR. They have continued to devalue the card and for most this last coupon clipping round of changes is going to kill the card. As much as Chase wants to call this a high-end product, it is not when you are coupon clipping and offering SWA benefits for $75k in spend. Sorry but it’s a fact and if they think offering SWA A+ and IHG Diamond is going to incentivize people to spend $75k then they again are living in an alternate reality.
As Gary noted — and everyone should print and paste this to the refrigerator — “Chase Points Are Better For Awards Than Paid Tickets”
I can’t wait to get the IHG status and the A list status……two of the least used programs I belong to.
Your analysis is good, but only works for people who are committed to understanding how to get the best value and that effort is the source of the fatigue you alluded to. It’s tiring to have to remember to make one hotel booking in the first half of the year and another the second. If Chase wants me to permanently switch to them rather than booking with Hyatt an Marriott directly they should offer a benefit that entices me to make them the default for every reservation and not just two a year.
What isn’t clear to me from what you’ve written is whether Chase makes or loses money on hotel and/or air bookings via their portal. One would assume the former since they are incentivizing this but I’m at a loss to understand how given that airlines no longer pay commissions on air tickets. Perhaps Chase but a deal.
That’s leaves unbonused spend. Assuming one has status with Marriott and Hyatt its nice to be able to get Diamond for stays at Kimpton and Intercontinental for the occasional stay. It would be great to see your take on charging 75k on CSR vs 40k on the IHG card. Obviously it will be highly dependent on how much spend one would make on the CSR regardless but its something a lot of readers may be thinking about.
Their apple credit is not easy to use and you have a family on apple one
@gary- so for 8x points you will book flights through their portal and deal with all grief that comes with having to make any changes when things go wrong? Also looking at a city like London I didnt see any branded hotels that were under Edit- no hilton or bonvoy or hyatt hotels? and also prices were insane
– I was going to dump Chase Sapphire before and will certainly do it now because I am not interested in wasting my time to squeeze all the “value” of this credit card. In the past airlines were trying to become banks by printing and devaluing frequent miles’ currency. Now Chase is trying to become a travel agency to resell airline tickets and hotel rooms. Who is going to run the portal? Expedia? Booking Holdings Inc? Are you going to have two middlemen between you and your actual travel provider? Two years ago, I spent 2.5 h on a phone in Hanoi with Chase Travel to rebook my return to the US because the incoming JAL flight was delayed. Never again – just book directly with an airline. If you want 3% cash back on all your dining and travel regardless how you book– get a no-fee Costco Citi Mastercard (assuming you a Costco member, trip to Costco will save you vs. DoorDash grocery delivery).
I know you get a lot of ridiculous grief for allegedly “being in the pocket of the card companies” and I never gave that much weight. But when you post FOUR articles in a couple of days essentially defending the Sapphire Reserve reset that appears to be nearly universally unpopular with those who own the card, you do give the conspiracy theorists and trolls wayyy too much red meat to chew on. Read the room. The card may work for you at that rate given your atypical for most cardholders lifestyle but it’s not going to work for many…not at that renewal price and not for getting coupons that most can’t/won’t use ever and make them jump through more hoops than ever before to get those rewards while gutting the things that made the card worth keeping at $550/year. You made your point in the first post. The other three were pure overkill…like you were acting as if you kept saying it maybe people will start taking your side. It doesn’t work that way but it does make you appear a little too desperate…for whatever reason I don’t know. I will probably dump the card and revert to the Sapphire Preferred. I can pay for my own Global Entry if none of my other Chase cards have it and Priority Pass is a nice to have but not mission critical. I’ll never fly Southwest, rarely use Lyft, the Apple TV rebate only makes sense if you subscribe for the full year but I’m a streaming site churner and only subscribe to a service a couple months out of the year when there’s something I want to see so this benefit is a bad fit for me, don’t own a Peloton (or have room for one) and I never book high end hotels or go out of my way to eat at $200+ restaurants just to get points multipliers. At $795, I’d be lighting money on fire with the card and can do better with Sapphire Preferred alone.
Interested in your comments on The Edit since as others have mentioned, I always book direct and nearly always use points. If I booked a Hyatt as a Globalist directly and have to cancel within the cancellation period, I get my points back. If I book through The Edit using UR points at 2 cents per point and cancel within the cancellation period, what do I get back? UR points?
I know I can’t use Suite Upgrade Awards with The Edit, need a two night stay, and can’t use a special rate like AAA or Senior (or even perhaps even Member Rates), but trying to figure out other disadvantages if any. If there are no other disadvantages and I get my UR back if I cancel, it becomes a simple task of comparing transferring UR points to Hyatt and booking vs. booking directly using UR points, and seeing which one is cheaper once I receive 2 cents per point through The Edit (leaving aside the $250 credit which I would need to use on something at the hotel).
I love my CSR card. But if Chase believes I will have an incentive to spend $75K on the card to obtain IHG Diamond and Southwest A+ then they’re sorely mistaken. I currently exceed $75K expenditure on the card but that’s because I place ALL travel, including expensive cruise fares, on the card due to the 3X earning. Taking that away is a big negative to my situation. I’ll have to run some numbers but I doubt the $795 annual fee is going to work in my situation. And I hate the coupon clipping mentality that cards are using. One needs real-time spreadsheet updates to determine which card should be used with which merchant under what circumstances. I’m not going to play that game.
What Kuloko says is spot on and the reason why I would very rarely if ever use the portal. Travel warriors, especially leisure travel warriors, know better than to book through portals unless they are absolutely certain that trip is never going to change. Most of my trips never carry that certainty so booking direct is the way to go or pay a 3rd party like Cranky Concierge to handle my trip and any hassles that pop up. This is why I don’t get what Chase is doing here. They’re trying to push their clientele to use the portal by reducing the benefit of not using the portal but the clientele they’re pushing are predominately ones who know better and prefer to book direct. This raises an interesting question: How long before Chase starts dropping transfer partners or starts making points transfers less favorable than using the portal? It’s probably going to have to happen because Chase won’t be able to capture the customers they’re trying to capture if they keep giving them an out via transfer partners with decent redemptions. As long as the terms stay the same, those people will keep using the transfer partners over their portal.
Come on, anyone with a lot of spend can do much better with the no fee US BANK Smartly Visa 1.0 at 4% cash back on everything.
Terrible changes – sadly will be downgrading or closing
So I suppose the million dollar question is: What the best travel card on the market?
So let me get this straight,
Chase run by arguably the best CEO in the world though they can make money on this as a stand alone product? The users were going to be high end that do travel and dine out a lot. They hardly ever have revolving balances to pay 20% interest on. Was that that hard to figure out ahead of time? I could understand if they wanted to make it a loss leader to bring clients into their Wealth Management Program maybe by having advisors having a small office in the Reserve lounges.
I will be very interested to see the drop off rate over the next 2 years. I just hope that AMEX is paying attention to the customer response to Chase when they formulate their roll out of the refreshed Platinum card.
@Doug Swalen — Some see ‘red meat’ and ‘trolls’ while others see ‘engagement bait’ and ‘referrals.’
@5150 — US Bank practically nuked their own card shortly after releasing it; also, you have to have $100K with them earning practically no interest. At least BofA allows Merrill investments in their tally for the 75% bonus on their cards. 2.62% everything (BofA) may be better in that case. However, the issue with both US Bank and BofA is no transfer partners, just cash-out. The benefit of Chase (and BILT) is Hyatt, United, (and Alaska) which can have outsized value. Chase is gonna benefit these other institutions by its changes. And if not those, then Citi and CapOne.
Chase is counting on CSR to be “sticky” – that come Fall, most of us won’t notice the changes and continue using the card as our primary as we have done since 2016 (in my case). But affluent customers – the ones that CSR claims to desire on one hand then completely disrespect on the other (I’ve never used DoorDash or Lyft, nor plan to, nor does anyone I know use these city-based, youth oriented services) – pay attention to their costs. It’s one of the reasons why they are affluent in the first place.
CSR becomes a $990 card for my wife and me. There are no new perks for us, nor do we “clip coupons” and play games with our discretionary spending. Must stay 2 days for 1/2 the hotel credit? Seriously?
We use CSR primarily for international travel. PriorityPass lounges are already disappearing (there are none in Newark whereas 5 years ago there were 2), business class on many airlines nets one access to their own lounges, and AA’s Admiral Club is worth the daily cost in the places where neither is available. Nixing the 1.5 redemption is a deal-breaker, considering we have banked over half a million points. Thankfully, we can burn through those before October 2027. I see no mention of the canceling of travel insurance – the main reason we jumped from Citi to CSR as our primary, but it wouldn’t surprise me if that’s in the fine print.
Don’t sugar coat it. This card is a ball of yarn. The young people who like couponing can’t afford it, and the older people with the means who can (like us) won’t waste our time with it. But Chase has the right to pursue profit, and thankfully, we have the right to downgrade the card. Writing for your sponsors couldn’t be more obvious. Good luck with that.
Andrew – here are some ideas:
1) Chase Sapphire Preferred + Chase Freedom + Chase Freedom Unlimited – very few benefits, but strong points earnings for a total $150 fee. Loss of 1.25 cent redemptions is a negeative
2) Whatever the premium credit card is for your preferred airline – club access, status benefits, etc are valuable if you spend a lot of time with that airline. United, Delta, American, whatever
3) Capital One Venture X or Venture – 2x earnings on all spend globally, travel partner transfers, ability to redeem against travel purchases
4) Amex Platinum – still a pretty good card if you can get value out of the credits
5) Apple Card – 2% cash back globally if you can use Apple Pay, no foreign transaction fees or annual fee
6) While Gary is too positive on the CSR, it is actually a good card if you can visit a Chase Sapphire lounge regularly, and you book a lot of Chase portal, airfare, hotel and dining expenses.
Is IHG status and Southwest A-List really an incentive to spend $75K on the card? Chase can offer you those for a lot less spend and a much lower annual fee.
Unlike Amex, this is an appealing card for international travelers because it’s a Visa. UA Gold or AC 50K seems like it would be way more useful as you’d get *G.
briefly mentioned above, but i easily put >75000 a year on the card for cruises alone. I can use UR points through the portal and save several thousand dollars a year on J flights at 1.5 cpp. Its really not hard. However, I look at AMEX, Chase UR, Venture X, and the carriers own pricing for international J before I commit. Downgrading when time is up, and starting my research for my next big spend card. I doubt AMEX can do it for me, and Venture X has terrible international J choices.
@ Anthony — The best cards are the ones that get you lounge access/status with your chosen airline(s) and hotel program(s) + whoever has the best SUB + one per household that offers the biggest x for direct airfare + one per household that offers 2x on all spend for the lowest AF. For my Delta/American/Hyatt/IC household, that means a bunch of DL AMEX cards, whoever has the best SUB + one Plat AX per household + one VentureX per household. Others acquired for SUBs stick around if they offer something more valuable than the AF at renewal — eg, excess Hyatt and IC cards for free night certs and Alaska cards for BOGOs. Other cards are crap after year 1, including the CSR and the CSP.
Lipstick on a pig. A lot of these benefits are coupons, low value, or both. That’s insulting.
Reflecting on the changes and determining their usefulness to me, I think it is on the net worse for me. I can’t/won’t use the Edit credits, just like I’m never able to use the $200 Amex FHR credits. The cost to use is too high given my travel preferences/patterns. The same is true with the dining credits, which are also only for restaurants that are too far away from me to reliably use. The Doordash credits can be useful, but 3 separate credits adding up to $25 a month, then it is far less useful. That’s also on the current iteration, though. I’d value it at 50% of face value, so $150 a year. Stubhub is something I’ll almost never use, but could be useful at random times. At best it is worth $150 a year to me, probably less. I don’t need Apple TV, but I’ll value that one at 2 months worth, since for 10 months of the year I don’t care at all and maybe at random times I’d want it, so $20. The point earning changes don’t really move the needle for me in either direction. The 1.5 cpp switching to boosts is a huge loss for me as my primary travel these days is domestic economy. 1.5 cpp is a great value for that kind of redemption. So for $795, I’m getting at best $620 worth of “stuff”. Previously, I’d be getting $450 of value for $550 (if you count the Doordash credits). So this is a downgrade for me, especially when coupled with the loss of 1.5 cpp. This post at least helps me see the economics for Chase, and how they are trying to provide benefits that are lower cost for Chase or more profitable for them. But for me and many others, this card isn’t going to be in our wallet.
I am very surprised no one mentioned the travel insurance and car rental insurance benefits. CSR covered a rental car stolen off the street mid-day in SF (and letter ticketed by SF police after I had reported it stolen – joke SFPD), a rental car accident in Lisbon, and expenses from a missed connection. I tried using AMEX Plat insurance in the past and couldn’t get a penny.
It is very disappointing that the 3% general travel category is going away, but the thousands I save in travel insurance with the CSR will keep me using it for cruises and tours. I spend over $100k per year in those categories and will miss that 3%.
@Anthony – Valid point about the card being more worthwhile for Gary and some other individuals who would use the lounges regularly.
Thanks and yeah, I’m not willing to work that hard. I’ll keep an eye open for Chase downgrade options. Hopefully you can help us with that. For me, the best thing about Chase is their customer service – being able to talk with a human right off the bat.
Right. Trying to make sure I get my money’s worth from the entertainment book-style benefits is just exhausting. I’m not interested in spending $990 in annual fees (me+spouse) to be exhausted. This card was great while it lasted. Time to go back to the CSP.
Life is too short to require a PhD in travel program maximization.
I was willing to obtain a 4 year degree in the field but requiring PhD level research is simply a requirement that is far too steep for me.
@Sam, Perhaps no one mentioned the travel insurance and car rental insurance benefits because they simply could not remember they existed?
Even with your helpful reminder, most are not going to remember these benefits in 6 months or 3 years when they have the need.
@Sam – I mentioned these in my first post yesterday on the product changes
Nine years ago people still visited Chase branches to use the ATM to get cash. Today cash is used less than ever. As are physical credit cards. The phone is now the ultimate payment device.
With retail banking on the decline, the credit card is how customers primarily interact with Chase on a day to day basis. It is the complete foundation of an ecosystem upon which their other profitable businesses are built. And they have created new temples – airport lounges – where like minded compatriots / wealthy clientele can gather over food and beverage and feel good about the brand.
I am fairly sure that the bankers at Chase know a thing or two about accounting. The CSR was the ultimate acquisition tool to get folks to interact with the Chase brand. Good news – you can spread any minor CSR losses (if there are any) among all of the other business units as them paying for the cost of customer acquisition. If anyone who has a CSR takes out a loan, part of the profit for that loan should be attributable to the fact that they have a CSR in the first place.
If Chase executives are not viewing the CSR that way, and are just looking to monetize their poor travel portal offerings, they should re-evaluate their thinking.
Loved the Entertainment Book reference. Enjoyed leafing through those as a kid! Adults sometimes have better things to do. (Sometimes not!)