Frequent Miler's latest team challenge, Million Mile Madness, is almost done! The last two weeks Greg, Nick, and Stephen competed to earn 1 Million SAS miles by flying 15 airlines. But who completed the challenge with the most Speed, Affordability, and Style?
It’s official. We’ve entered the golden age of credit card sponsored perks. Maybe “platinum” age would be a better term given that Amex was an early adopter of this approach with their Platinum cards. That said, I think that Capital One may have been first when they partnered with Uber in 2016. Later they partnered with Hotels.com to offer 10X rewards for certain cards. Both promotions are in the past. Capital One may have been first to the party*, but I believe that Amex was the first card issuer to go all in. When they increased their Platinum card’s annual fee from $450 to $550, they added up to $200 per year in Uber credits and later up to $100 per year in Saks Fifth Avenue credits. And thus, the platinum age of sponsored perks began.
* I have no doubt that other card issuers offered sponsored perks years before Capital One, but this is an “on my mind” post, not an “I researched the heck out of this post” so cut me some slack.
Win, win, win?
In ideal situations, sponsored perks can be a win-win-win. I don’t know how these deals are constructed but there’s no doubt in my mind that the partner brand pays the credit card issuer or offers huge discounts to be the sponsored perk provider. Consider the Platinum Uber credits for example. With this benefit in place, Platinum cardholders undoubtedly tend to choose Uber over the competition in order to use the monthly Uber credit. I don’t know whether Uber pays the full cost of these credits to Amex or only a portion. Either way, for Uber, it was a bold marketing move worth paying for. For Amex, they got a new headline-grabbing perk (up to $200 per year!) for far less than $200 cost to them. And, for customers who frequently use Uber anyway, this perk practically amounts to $200 per year in real money rebates.
Or lose?
Customers lose when they over-value sponsored perks. These perks can lead to lock-in which may negatively affect their purchasing decisions. Consider, for example, the Amex Gold card’s dining credits. The Gold card offers up to $10 in statement credits monthly with participating dining partners: Boxed.com, Shake Shack, Seamless/Grubhub, Cheesecake Factory and Ruth’s Chris Steakhouse. If you’re a frequent Boxed.com customer, for example, you might think that the $10 per month benefit amounts to $120 extra per year in your pocket. In reality, though, you may then shop Boxed when other online sellers offer better prices. This kind of thing can quickly eat into the real value you get from this perk. Or, what about that Uber credit with the Amex Platinum card? Would you choose Uber even when Lyft is cheaper? If so, again, the real value gained is less than face value.
Chase makes the sponsored perk trend official
Beginning January 12th, Chase is increasing the Sapphire Reserve annual fee from $450 to $550. To soften the blow, they’ve added sponsored perks from Lyft and DoorDash. For 2020 and 2021 (that’s as far out as they’ve committed so far) cardholders will get a DoorDash DashPass subscription and $60 per year in DoorDash credits. Plus, cardholders get a one-year Lyft Pink subscription and will earn 10X on Lyft rides.
By blindly following Amex’s lead, Chase has made the sponsored perk trend official. They increased the annual fee while adding perks that cost them very little (if anything). I’m sure that Lyft and Doordash are thrilled at the idea of having all Sapphire Reserve cardholders turning to them first for rideshares and food deliveries.
For cardholders, the change is a mixed bag. I’m sure there are cardholders that will get more than $100 per year value in the combined benefits. My guess, though, is that most will get less than $100 per year value and so the increased annual fee will be a net loss. Worse, many cardholders will likely choose Lyft and DoorDash even when they are not the best options. When other options are significantly cheaper, it’s at least theoretically possible to estimate the cost in doing this. Much harder to quantify is the inconvenience cost. For example, you may have to wait longer for Lyft than for competitor rides. Or, you may choose to order from your second choice restaurant when DoorDash doesn’t support your favorite.
Get used to it and make good decisions
Love it or hate it, I believe that sponsored perks are here to stay. As consumers, we need to be practical about the true value of these perks. Rather than convince yourself that you’ll easily get maximum value from a perk, I suggest asking yourself how much you’d be willing to pay to subscribe to that perk if that was an option. For example, let’s say you ride Uber enough to easily make use of the full $200 per year in Uber credits from your Platinum card. That’s great, but I suggest that thinking of it as a $200 per year rebate is overgenerous to Amex. Instead, imagine if Uber offered to sell you an annual subscription to this perk. What would you pay each year in order to get $200 in Uber credits dolled out in $15 monthly chunks and $35 in December? Keep in mind that the credits disappear if they’re not used. It would be ridiculous to pay $200 for this subscription, right? Personally, I ride Uber often enough that I’d probably be willing to pay $100 per year for this subscription. I figure that it’s worth $100 and and the inconvenience of lock-in for the chance of getting back $200. So, when I look at the Platinum card’s annual fee, I figure that the Uber perk is worth $100. In that light, Amex’s move to increase the Platinum card’s annual fee from $450 to $550 with the added Uber credit was, for me, a wash.
How about Chase’s latest changes? The nice thing about the $60 per year DoorDash credit is that it’s not doled out monthly. You get the credit all at once. As a result, I think it will be very easy for most of us to take full advantage of that credit. One or two orders should easily use up the full $60. I’d be willing to pay $50 for the combination of $60 credit and free delivery (which you get from the included DashPass subscription). The Lyft benefits are harder for me to estimate value. Earning 10X rewards is great. Also, discounts given by the Lyft Pink subscription would be great. And I’d be really psyched about Lift Pink for the free scooter and bike rides if I lived in a city where Lyft offered these things. But I don’t. And, for now at least, I still have an Amex Platinum card which encourages me to use Uber (or Uber Eats). So, I personally wouldn’t pay much for the Lyft benefits if they were available as a combined subscription. My guess is that I’d be willing to fork over $25 per year, at most. Keep in mind, though, that if your circumstances are different, it can be far more valuable to you. For me, the Sapphire Reserve changes are a small net loss. I’ll be charged $100 per year more for the annual fee, but I’m only willing to pay $75 for the combined DoorDash and Lyft benefits. That means that I now see the Sapphire Reserve changes as costing me $25 per year. That’s not a huge loss by any means, but it’s important to know when deciding which cards to keep and cancel.
See also: Is the $550 Sapphire Reserve worth keeping? Here’s how to decide.
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Seems like the Ink Business Preferred is the new go to card
That Lyft deal is going to be great for a lot of city dwellers and suburbanites traveling. We don’t take a ride often to the airport, but 30% effectively off Lyft (10 UR plus Pink membership) plus the relentless increases in airport parking (MDW/ORD) plus the time savings (at least an hour shuttling) start to make it WAY more worthwhile. For us, about $30 net to MDW now each way vs $12 a day to park makes it worthwhile on a 4-5-day trip. Before it was more like 7. That’s just the first thing I thought of. Forget DoorDash.
Not sure about your employer, in my company, for business travel, I must use corp card to pay car rider service. So you won’t get 10X.
toomanybooks
Look @ Loews Chicago hotel parking it’s a 5 min free shuttle ride to T5 or 10 min to T3 . I park there if it’s a short trip $7.50 per pre paid . As PU @ T3 is every 20 mins so travel there and T5 u have to call so Don’t Do That do T3 . Like 10 floors of covered parking safe and always there .Longer I just take Uber always nice and dependable 5* I’m like an hr out.
CHEERs
Greg, agree with your analysis. I also highly recommend readers to try Greg’s spreadsheet. I initially rejected that idea. After all, we come to this blog for fun and for easiness. Who on the hell wants to work with Excel instead? But after you bear with initial dislike and start to use it, it really works! Within 3-5 min, you will become a master from knowing nothing. It is that simple.
Back to the topic, my own estimation thanks to the spreadsheet is -85$ net loss. But I likely will keep it for another year. For one thing, I do not have other premium card backup; secondly, my next AF is due to this Dec, so I won’t get hit immediately and can delay my decision till then; last, I know I tend to estimate conservative, so it is likely say -$40 instead. Overall, not pleasant but bearable.
Greg, I don’t see you value primary car rental in your datasheet. I think that’s one key reason for me to keep CSR. Of course, you can say it is part of “travel insurance” but I still think it is worth being listed separately.
If they were going that route anyway, I am thrilled Chase has partnered with Lyft instead of Uber; I like Lyft much better for several reasons most of which are better value/their employees are invariably more satisfied with how they’re treated.
I spend at LEAST $55/mth on ride sharing x 12 mths = $660/yr x 10 URs = 6,600 URs x .015 = $99. Chase just made up my AF increase, & I did nothing differently. I am all for shifting the fee burden to all cardmembers so I can continue high earnings with my Chase ecosystem (I own all personal & business UR cards) & burning on their portal at a 33% discount.
I appreciate this thoughtful post – thank you.
Sponsored benefits by cash-burning, employee-driving startups also promotes potentially negative consumer behavior and exasperates societal issues. Others have written about this more eloquently than I am about to:
So, we get WeWork for a year, yay! WeWork pays (or paid) its employees very little, drives (or drove) them to meet impossible sales quotas, and burned through billions of dollars of investor money (it also installed carcinogen-generating phone booths and engaged in other not-great behavior). But hey, everyone’s hustling these days – and it’s free! We sit at the WeWork (for a year) and drink coldbrew and pay nothing. And yes, once or twice I saw an employee cry. And yes, during that time I didn’t support a local, potentially-sustainable co-working space. WeWork burns down, and we move on.
But that’s okay, because we move onto the free Doordash money – another cash-burning startup that may potentially cheat its employees out of tips and other negative practices. We see that driver in the old car struggling to make a few bucks, but hey everyone’s hustling and it’s free! And we have Uber, or if Lyft is cheaper than Uber then we have Lyft.
The credit card companies are paying pennies on the dollar, if anything, for these benefits – but there are costs, and those costs distribute through to everyone, including those benefiting from the “free” goods and services. Obviously, one individual using or not using those benefits is not going to change anything; however, it my be worse considering the larger costs involved.
Nicely said
Citi ,Chase and Amex are doing it wrong . My GI just canceled a card because of the high fees and is building a Mansion. . They got the bonus thing right finally 2 tier sign up and u need to SPEND to get the higher one . You want to keep the Flippers out like I who don’t spend . What they should do @ the second year is with say a $20k? spend don’t raise the foolish AF but unlock more freebies back dated to AF if u spend that much .
CHEERs
Yes, the Chase moves constitute vindication for AMEX:s approach of difficult-to-use, low-cost-to-the-bank credit card benefits. In general, after Chase’s strong introduction of the UR ecosystem it seems in the last year or so that the pendulum is swinging back towards AMEX. Are their high fees enough to support the high multipliers? Or are the payouts still too rich? Time will tell.
What’s funny is the response from done people that Chase “needs” to slip then some more cash (through the letterbox, or maybe just leave it on the nightstand) to convince them to continue holding their card. Chase’s problem is not retaining people like us — it’s too many people like us!