Showdown: Sapphire Reserve vs Preferred First Year Value

UPDATE: Since this post was first written, the Sapphire Reserve’s annual fee has increased.  For an updated comparison, please see:

–> Chase Sapphire Reserve vs Preferred. Which is worth the price?

While there are many great credit cards available, the Chase Sapphire Reserve card continues to be my single favorite travel rewards card.  In my opinion it is ideal for those who dine out and/or travel often (thanks to earning 3X in those categories) and who like to use rewards for travel (use points for 1.5 cents each towards travel or transfer points to high value partners).  It helps too that the card earns Ultimate Rewards points.  You can greatly ramp up point earnings by pairing this card with one that earns 5X in rotating categories (Freedom), 5X in select categories (Ink Cash), 3X in select categories (Ink Business Preferred), or 1.5X everywhere (Freedom Unlimited).  Points earned on all of those other cards can be freely moved to your Sapphire Reserve account to make them more valuable.  For more about the Sapphire Reserve, see: Chase Sapphire Reserve Complete Guide and The BEST travel rewards card.

So, that’s all great, but here’s the interesting thing: If you want the Sapphire Reserve you might be better off applying for a different card… the Sapphire Preferred.  It should then be possible to upgrade to the Sapphire Reserve later.

Take a look at our Top 10+ Credit Card Offers page.  At the time of this writing, the Sapphire Preferred is #2 on the list whereas the Sapphire Reserve is #10.  This list changes dynamically as offers change, so the specific placements on the list may not currently be the same as what I just reported, but the general idea will probably hold: the estimated first year value of the Sapphire Preferred is more than the Sapphire Reserve.  The reason for this is that the Sapphire Preferred’s signup bonus is better: 55K points (if you add an authorized user) and first year free with the Preferred vs. 50K points with the Reserve and $550 annual fee due upfront.  And keep in mind that you can’t get both cards.  Chase will let you have only one or the other at any given time.

At a very high level, it looks like the Preferred is the way to go for it’s signup bonus.  This high level view, though, ignores the many Sapphire Reserve benefits that outweigh the Preferred benefits.  So, let’s dig deeper…

Analysis

Let’s look at the two cards side by side:

Travel Insurance Compared:

The Sapphire Reserve has quite a few benefits that can make it more valuable than the Sapphire Preferred, but only if you actually make use of those benefits.  In order to compare the cards’ first year value, it’s necessary to make assumptions…

First Year Assumptions

The following assumptions definitely won’t hold true for everyone and probably won’t hold true for anyone, but I’ve got to start somewhere.  In order to compare the first year value of the two cards, I’ll make the following assumptions:

• You want / need to add an authorized user card
• You do not plan to use the Global Entry reimbursement (maybe you already have that from another card, for example)
• Over the course of the year, you’ll spend $6,000 in travel & dining combined.
• We’ll ignore any money spent outside of travel & dining since both cards earn at the same rate: just 1X.
• During the first year, you will redeem points to pay for $450 in travel, but you won’t otherwise use any points.
• During the first year, you visit a Priority Pass airport restaurant once with a guest.  You save $28 x 2 = $56.  For simplicity lets pretend that you would have eaten there anyway and spent just as much (in order to count this as a true $56 win).
• You do not have occasion to file claims for any of the card’s trip protections.

We can now tally up the first year costs and benefits:

With the above set of conservative assumptions, the Sapphire Preferred comes out ahead of the Sapphire Reserve in first year value.  Sure you would end up with 7,000 fewer points, but you’d also pay $269 less.  That’s a good trade-off.

That said, it only takes a few minor adjustments to the above assumptions to move the Sapphire Reserve into the win column.  For example, if you don’t need an authorized user card you’ll save $75.  And if you can make use of the Global Entry reimbursement, that’ll give you a $100 benefit too.  Combined, then, the Sapphire Reserve’s first year net cost (when valuing benefits at 100% of face value) improves.

Another thing to keep in mind is the Sapphire Reserve’s better insurance coverage.  Even if you don’t end up filing any claims, there’s value to the piece of mind of knowing that you have better coverage.  You can read more about Sapphire Reserve’s travel insurance here.

Conclusion

Given a conservative set of simplifying assumptions, I found that the Sapphire Preferred offers better first year value that the Sapphire Reserve.  For many, it makes sense to to start with the Sapphire Preferred and then later upgrade to the Sapphire Reserve if/when you know that you’ll make use of the Reserve’s superior benefits or if you know that you’ll be spending a lot more on travel and/or dining.

On the other hand, if you know from the get-go that you’ll be spending a lot on travel & dining and/or will be making heavy use of the Sapphire Reserve’s premium benefits, then you won’t go wrong starting with the Reserve.

Note that whatever you do, it doesn’t change your ability to get a signup bonus in the future.  Regardless of whether you sign up for the Sapphire Preferred or Sapphire Reserve now, you’ll have to wait two years from the day your get the signup bonus before you can signup for either one again (and even then you can only do so if you no longer have either card).

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