Who Won This Soccer Match?
I am from Europe, which is why we are going to have a soccer match, but between credit card teams. The arrangement is a bit unusual, because there are only 2 players on each team and there are twins playing against each other. The prize is a middle-class family’s yearly credit card spending.
Team number 1: Chase Sapphire Preferred and Chase Freedom Visa.
Team number 2: Chase Freedom Mastercard (the twin) and Amex Blue Cash Preferred card.
The arrangement number 1 is considered the most lucrative for those who collect miles and points. I would have to agree. It is a powerful combination. You can take advantage of Freedom’s rotating 5 percent categories and transfer the points to Ultimate Rewards, which are more valuable. In turn, you can convert those points to miles in several airline programs on 1:1 basis.
Non-bonus spending through Freedom earns 1 percent cash back. Chase Sapphire Preferred earns 1 Ultimate Rewards point per dollar, 2 points on dining and travel. It comes with a $95 annual fee. You hear very often how it’s worth every penny and then some.
Let’s find out whether it is worth it for a middle class family, shall we? First, we will ignore travel earning and assume we will use points for that. So let’s take an average middle-class family like mine and break down annual expenses by category. Look at Freedom card’s 2013 bonus categories for reference at the bottom of the page. Usually, they don’t change that much each year, so most of it will apply to 2014 as well.
1) Groceries: $500 a month, or $6,000 per year.
2) Gas: $300 a month, or $3,600 per year.
3) Dining: $400 a month, or $4,800 per year
4) Amazon: $100 a month, or $1,200 per year
5) Drug stores: $100 a month, or $1,200 per year
6) Everything else: $600 a month, or $7,200 per year.
Grand total is $24,000, which is close to what an average family spends per year. That is about what we put on credit cards annually.
SOCCER TEAM number 1:
Now let’s calculate how much we can earn in rewards, using combination number 1. We will use Freedom for bonus categories and Sapphire Preferred for everything else. Look at Freedom’s rotating bonus categories table at the bottom of the page for reference.
1) Groceries: It’s not a bonus category anywhere. So we would get 6,000 in Ultimate Rewards points per year.
2) Gas: Bonus category in 2 quarters. We would have 9,000 Ultimate Rewards from that. Add 1,800 points from the other 2 quarters. I realize you can buy gift cards for the rest of the year, but my husband does not like to be tied down to a particular station. So let’s ignore that assumption. Total, 10,800 points.
3) Restaurants: Bonus category in 1 quarter, so would net 6,000 points from Chase Freedom. Plus, about 7,200 points from Chase Sapphire Preferred during the rest of the year, since it earns 2 points on dining. Total, 13,200 points.
4) Amazon: Gift cards can be bought at Lowe’s, CVS and some gas stations, which are Freedom’s bonus categories in all 4 quarters. You can buy them as you need them. So let’s say 6,000 points per year.
5) Drug stores: Bonus category in 1 quarter. Let’s ignore the fact that you can stock up ahead with gift cards. Most families will not go through the trouble. So 1,500 points plus 900 points from the rest of the year. 2,400 points total.
6) Everything else: 7,200 points per year for simplicity.
Grand total for the year: 45,600 Ultimate Rewards. Sapphire Preferred gets a 7 percent dividend on all earned points. I have to add the percentage to the amount I would have put on it for non-bonus spending. So that would be 1,617 points, 7 percent dividends, according to my calculations. 45,600+1,617=47,217 Ultimate rewards. Pretty good!
SOCCER TEAM number 2:
This is a second combination of Chase Freedom and Amex Blue Cash Preferred. We don’t get points, but cash back in this case.
1) Groceries: $360, since Amex gives 6 percent cash back on up to $6,000 per year.
2) Amex earns 3 percent back on gas. So, if we used it for half a year, it would get us $54 for the non-bonus quarters. The other 2 through Chase Freedom would give us $90. Total: $144.
3) Dining: $60 from the Freedom’s bonus quarter, $36 from the rest of the year. Total: $96.
4) Amazon: same principle as combination in the example of the 1st team. So, $60 total.
5) Drug Stores: Same principle, $24.
6) Everything else: Same as combination number 1, though Amex does give 3 percent on department stores. But to keep it simple, let’s say $72 per year, or 1 percent cash back.
Grand total: $756. That’s over 3 percent in cash back overall, since the annual spending is $24,000 per year.
So we have 47,217 Ultimate Rewards points from option number 1 vs. $756 from option number 2. Also, Sapphire Preferred’s annual fee is $95 vs. $75 for Amex Blue Cash Preferred. So if we add the difference to the cash back option, it would be 47,217 Ultimate rewards vs. $776 (+20).
So which one should you pick? Well, if you go with the option number 1, you are paying 1.643 cents for each Ultimate Rewards point: $776 divided by 47,217. You could transfer those points to United miles or Avios (British Airways currency). But if you have a family like mine, it would be very hard to redeem miles in economy and beat 1.64 CPM (cents per mile). My average redemption comes closer to about 1.5 CPM.
Keep in mind, very often Chase Freedom has a special redemption on gift cards at 10 and 20 percent off. If you are willing to buy those cards at face value for graduation or wedding gifts, you have to consider that as well. Chase currently does not run any bonuses on transfers to points or miles. By that logic, your cost for Ultimate Rewards point would be even higher.
Currently we fly free with all the miles and points we have accumulated through sign-up bonuses. That is where the real prize lies for a middle-class family.
There is no question that for a frequent single traveler or those who value premium redemptions, it might be worth it to pay 1.64 cents for Ultimate Rewards point. IMO, it isn’t worth it for most families with limited savings. I value Ultimate Rewards point at 1.25 cents each, which is what I would pay for it. For my family, the winner is the second team.
January – March
Gas stations
Drugstores
Starbucks stores
April – June
Restaurants
Movie theaters
Lowe’s Home Improvement stores
July – September
Gas stations
Theme Parks
Kohl’s
October-December
Amazon.com
Select Department stores