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The Chase Sapphire Reserve has been a long time favorite of the points and miles community. When it first launched in 2016, the 100k Ultimate Rewards sign up bonus was a sweet deal that made it an instant favorite.

Since then it has remained in the upper echelon of premium rewards cards. Chase recently increased the CSR annual fee from $450 to $550 and that led to multiple stories of travelers revisiting the card’s value proposition. The $100 increase in the annual fee was cushioned to a degree by the added LYFT and Door Dash benefits. This is on top of the other benefits that remained intact including Priority Pass Membership, 3x points on travel, 1.5x redemption value when points are redeemed for travel, the $300 annual travel credit and more. At this point, I believe that I will still get enough value out of the CSR to justify the $550 and many others will agree.

Why Do Banks Offer Benefits?

However, we need to keep in mind that Chase is in the business of making money. The CSR is a big part of this strategy.  While the CSR card does provide tons of value for travelers, Chase provides this card and the associated benefits because overall the bank makes more in revenue from the card than it pays out in rewards and benefits.  To understand how this card and others make money for their issuing banks, let’s take a quick look at a few things that drive credit card revenue.

  • Fees from merchants- These are typically 1.5-3.5% of each transaction
  • Annual fees
  • Interest on unpaid balances (In the points and miles game you should always pay off your cards each month!!)
  • Miscellaneous fees- Late fees, balance transfer fees, foreign transaction fees, etc.

Is this CSR Benefit better for Chase or Consumers?

On the opposite end of the spectrum are the costs (what we know as benefits and points) and these are what keeps customers using their card and driving the banks’ revenue. This is where the $300 travel credit of the CSR is so ingenious. Most points and miles bloggers gush over how great the $300 travel credit is because it is “so flexible”.

Did Chase set up this benefit to be flexible in order to benefit their customers? I’ve always thought the $300 travel credit was actually kind of silly. It’s easy to meet the requirements and I have always paid a $450 fee to get $300 back typically within a month or two. I’ve thought and have heard others argue that the CSR true annual fee was $150 (now $250) because of the credit. Fair enough but why even bother to have a credit that I imagine all cardholders will hit?

How the Travel Credit Benefits Chase

This is a clever marketing ploy and a great business decision by Chase. First, I have read countless stories about and heard multiple people tout the CSR as a great card and list the $300 travel credit as a huge perk. Great job on creating advocates for the card Chase!  That “salesforce” of happy cardholders has done a great job spreading the CSR gospel.

Secondly, the $300 travel credit doesn’t earn the 3x travel credit like a normal purchase would. This equates to 900 UR points which are worth $9 when redeemed for cash (I hope you are not doing that) or $13.50 when used to redeem travel on the Chase portal. This is the opportunity cost to each of us as a consumer. I think individually most of us say “So what?” and this is where the business acumen of Chase comes into play.

How Much Are We Talking About?

In the 2018 letter to shareholders, Chase shared its business results which included an impressive 99 million debit and credit cards with over $1 trillion in customer purchases. Since there are multiple Chase cards and the company does not break out the numbers for each card individually, it is tough to gauge how many CSR cards there actually are in the wild. With that in mind, these next numbers are estimates of the savings in rewards payouts that Chase keeps each year due to the $300 annual travel credit. I welcome you to add your own! Here is what I did in the table below.

Based on there being 99 million Chase debit and credit cards, and using several hypothetical percentages of that total being CSR cards, I’ve calculated the total number of CSR cards. I then took this number times the $13.50 in rewards “savings” that Chase realizes from not having to pay the 3x points on travel on the $300 travel credit to estimate the total annual savings to Chase from all customers.

a close-up of a number of numbers

As you can see, the cost savings really add up and this is only for one year! Even using extremely conservative estimates of the number of CSR cards issued since the 2016 CSR launch, we are looking at upwards of $100 million in rewards savings for a “benefit” that for most of us is a wash.

A Smart Strategy

My argument is that the $300 travel credit is nothing more than a smart strategy to get people talking about the CSR and to avoid paying the 3x on travel purchases for a portion of each cardholder’s travel purchases each year. I think it is an extremely shrewd tactic from Chase. I hope you think about it next time someone touts the CSR $300 travel credit as a great benefit since it is really costing you $13.50!

What are your thoughts on this analysis?  Do you agree, disagree or not care?  Let us know in the comments!

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