Cards Mentioned Below:
My bucket of credit cards from the past year has been quite full, and I recently noticed that a bunch of the cards are coming up on their anniversary, meaning it’s time to decide whether it’s worth paying annual fees on those cards. In my case, within a month I had to decide what to do about 2 Citi AAdvantage cards, the Chase Sapphire Preferred card, the Amex Premier Rewards Gold card, and my longstanding Amex Starwood card.
The whole credit card thing seems to lend itself to people making decisions based on emotion, rather than on analysis. You could easily find yourself paying $1,000/year in annual fees alone just because you “like” a few cards. But I’ve taken a step back and looked at my spending patterns and my mileage redemption patterns and I’m shocked by one card to kiss goodbye: the Amex SPG card.
I should start by saying that I’ve switched my day-to-day spending to the United MileagePlus Club card. It costs $395 (though they’re currently offering a $95 credit), but it gets you United Club access, which costs between $375 – $475, depending on your United status. Basically, you’re getting full club membership with the rest of the benefits for free. The other benefits are 1.5 United miles for every purchase (yes, 1.5 miles for EVERY purchase), no foreign transaction fee, Hyatt Platinum membership, and Avis Presidents Club. I would get the United Club membership regardless of whether I had this card, so I look at it as a fee-free card. If you weren’t going to get United club membership, then the equation changes considerably here.
It’s clear to me that I don’t need the AA cards (never fly AA) or the Amex PRG card (don’t put enough airfare on my personal cards to warrant the $175 fee for 3X points on airfare spend).
But the other two are a bit painful, because I like the Amex SPG — the points are hugely flexible, and when I want to use the points at a Starwood Hotel, the points + cash option has been really valuable.
But then I started to think more about it. My wife and I have 400,000+ Starwood points. I have enough for the forseeable future, especially since for longer vacations now I almost exclusively stay in a condo (thanks, Airbnb and VRBO!). For the family, it makes so much more sense to rent a condo than to stay at a resort (for an upcoming stay in Southern California, our 2-bedroom condo on the beach is half the price of one room at the Ritz Carlton across the street).
The United Club card offers 1.5 miles per dollar spent on everything. The Amex SPG offers 1.25 miles per dollar because of the 25% transfer bonus (when you transfer 20k points). I’m essentially giving up .25 miles per dollar if I use the Starwood card over the United card. Since I primarily use Starwood points to transfer to airlines, I’m paying .25 miles per dollar for the flexibility to transfer to other programs (since you can’t transfer to United at a reasonable rate). That’s a significant amount of cost for the benefit of possibly needing some flexibility. And while there are certainly Starwood-specific benefits to having the card (nights toward Elite status; 2x points on spend at Starwood hotels), I don’t stay at Starwood hotels enough to warrant keeping the card because of it, given the $65 annual fee. Even if I valued the Starwood points at 2.5 cents each (which I don’t), my first $2600 in Starwood spending would go toward earning enough points to cover the $65 (2600 bonus points X 2.5 cents). I simply don’t spend that much. For me, that means dropping the Amex SPG. I’m going to miss it.
The Chase Sapphire Preferred also has been great, offering 2X points on restaurants and travel. But it has a $95 annual fee, and when I looked at where I’m actually spending money, it’s a wash.
I put about $60k last year on credit cards (between business and personal expenses). About $12k of that was at restaurants and roughly $5k was on travel expenses. If I put those on the United card, I’d earn 25,500 miles. If I put those expenses on the Sapphire, I’d earn 36,380 miles (2x per dollar plus the 7% end-of-year bonus). In short, I’d be paying $95 for 10,880 miles. That’s roughly a wash. Yes, at a penny a mile I’d slightly be making out. But that also means dealing with another card. And I’m basically pre-paying $95 for 10,000 or so miles — and I have an aversion to “buying” miles in advance. I was ready to drop the Sapphire card, until I remembered something. And that something was the Chase Freedom card.
Chase Freedom has no annual fee, and offers 5% cash back (or 5X Ultimate Rewards points when you have a Sapphire Preferred or Ink Bold® Charge Card card) on select categories each quarter. You can only earn the 5X on the first $1500 per quarter, but that means 30,000 extra points per year that can be transferred into the Ultimate Rewards program. That’s when it hit me:
AFTER THE FIRST YEAR, THE CHASE SAPPHIRE PREFERRED IS ONLY WORTH HAVING IF YOU ALSO HAVE THE FREEDOM CARD. Well, it’s only worth it for me. The annoying news is that the Freedom signup bonus is only 10,000 points right now (it’s been as high as 30,000 in the past), so it may be worth waiting for a little while to see if it gets better. Unless you’re in my boat, and your Sapphire Preferred annual fee is coming due – then it’s more than worth considering.
(UPDATE: Reader AK in the comments makes a great suggestion: if you have multiple people in your household, only one of you needs to keep paying the annual fee on the Sapphire Preferred, while the others can get the Freedom. Their Freedom points transfer to your Freedom account, and those points can be transferred to Ultimate Rewards. I’m going to cancel my wife’s Sapphire right now! And just for fun, I won’t tell her!)
My point here isn’t that this is necessarily the best path for you. Rather, I think now is as good a time as any to step back and analyze your credit card spend. I think when you look at where you’re spending annual fees, you may find that you haven’t really optimized the card options available to you.
Does this all sound a bit confusing? Take advantage of our FREE credit card planning service. We’ll help you find the best cards so you can take that trip you’ve always dreamed about. Click here to learn more.