Why I Got the Chase Sapphire Reserve & the Math Behind It

Is That Sexy, Metal, High-Fee Credit Card Really Worth It?

Read Time: 8 minutes

I used to think people who paid $450/year for a credit card were either celebrities or just downright crazy. Then I did the math…

In this post I want to walk through the very numbers I calculated to see if the all those perks that come with fancy credit cards were worth it or not. I chose to focus on the Chase Sapphire Reserve (CSR), but the same process would work for almost any card, for any person.

First I’ll outline the general process so you can understand the reasoning behind the calculations. Then we’ll get into the actual numbers. Let’s get started.

The General Thought Process

Paying for a credit card is really no different than any other product or service you might buy. If you expect to get more value out of something than it costs, buy it. If not, don’t buy it. It’s that simple.

But with credit card companies, nothing is as easy as it should be. With all the points, miles, travel credits, etc., calculating the true value you get out of a credit card can be tricky.

That’s why I broke the calculation down into 4 intuitive steps.

  1. Ignore sign up bonuses & perks you don’t care about
  2. Calculate the true annual cost of the card
  3. Determine the breakeven spending amount
  4. Compare the breakeven to your actual spending amount

With that general process in mind, let’s see how the numbers worked out for my personal situation.

1.  Ignore Sign Up Bonuses & Perks You Don’t Care About

You read the right. Ignore the sign up bonus. The reason is because I’m not interested in credit card churning, or opening credit cards solely for the sign up bonuses, only to cancel them shortly after. If that’s your thing, good for you.

I prefer to find credit cards I find consistent value in, and plan to hold onto for years. I’ve heard Sebastian from AskSebby refer to these as “keeper cards.” That doesn’t mean I won’t use or enjoy the sign up bonus, it just doesn’t factor into my calculation of whether I want the card or not.

The same goes for some other perks as well, such as airport lounge access. The CSR comes with a free Priority Pass membership, which gets you into over 1,000 airport lounges worldwide. That’s a great perk! And I will definitely take advantage of it. But since I would never pay out-of-pocket for an airport lounge, I don’t factor this perk in either.

Moral of the story, when doing the math, ignore perks you don’t care about or wouldn’t otherwise pay for.

Alaska Airlines Airport Lounge in LAX
Alaska Airlines Airport Lounge in LAX. The 1st airport lounge I visited after getting the CSR.

2. Calculate the True Annual Cost of the Card

The CSR has an annual fee of $450. Sounds expensive. But looking deeper, you’ll see the true cost of the card is much less.

The CSR also comes with a $300 annual travel credit. So if you spend at least $300 per year on travel (which I do), then that drops the price of the card to only $150 per year. Again, if you don’t travel that much, don’t include this perk in your calculation.

The CSR also comes with a $100 credit for Global Entry or TSA Precheck. Those are both perks that help you speed up your time in line at airports. Since I already use this perk, this is valuable to me.

Some of the benefits of TSA Precheck.
Some of the benefits of TSA Precheck.

Both programs are good for 5 years, so $100 / 5 years = $20 per year. That’s how much I value this perk at, which drops the price of the card down even further to $130 per year!

As you can see, the true annual cost of a particular credit card will depend on how you value certain perks. For me personally, the CSR has a true annual cost of $130. Much less than the sticker price of $450.

3. Determine Your Breakeven Spending Amount

Now that I know the true annual cost of the credit card, I can calculate my breakeven spending amount. By that I mean, how much must I spend, per year, to earn enough rewards points to offset the annual cost of $130? Sorry, this part requires some math.

To start, you must know how many points you earn per dollar spent on the credit card you are analyzing, and how much those points are worth when you redeem them. This may require a bit of research, since each credit card has its own bonus categories and rewards.

With the CSR, you earn 3 points per dollar spent on travel/dining, and 1 point per dollar spent on everything else. Each point is then worth 1.5¢ when you redeem them for travel.

Of course, the more you claim to spend on bonus categories, the less you need to spend overall to break even, since those expenditures give you more points. You can play with the numbers to match your situation, but for me, I conservatively estimated I spend about $1,000 per year on the bonus categories of travel and dining.

  • $1,000 bonus spending x 3 points per dollar = 3,000 points
  • 3,000 points x 1.5¢ value per point = $45 of value
  • $130 true annual cost – $45 of value = $85 remaining cost

That means that, in addition to $1,000 per year on travel/dining, I need to spend enough money on all other items throughout the year to give me $85 worth of value to breakeven. Now to calculate how much spending that is.

  • $85 of value needed / 1.5¢ per point = $5,667 other spending needed

So I must spend $5,667 per year, plus $1,000 on travel/dining to break even. It’s easier for me to picture my spending on a monthly basis, instead of annual, so:

  • $5,667 of other spending / 12 months = $472 per month
  • $1,000 of travel/dining spending / 12 months = $83 per month
  • $472 + $83 = $555 in total spending per month

So I must spend approximately $555 per month on my credit card to break even. If I spend less than that, I am losing more money on the annual fee than I am getting in value. If I spend more than that, the card is a good value to me.

4. Compare the Breakeven to Your Actual Spending Amount

The final question is to find out how much I spend, on average, per month on my credit cards. If it’s more than $555, I should get the CSR. If not, the card is not for me.

I logged in to my online bank account and pulled my monthly credit statements for the last 12 months so I could get a solid understanding of how much I spent. I use my credit card whenever I can, so it was easily over $555 per month.

So, I applied for the CSR right then and there. Thankfully I was approved right away because I have an excellent credit score.

A quick breakdown of FICO score ranges & inputs.
A quick breakdown of FICO score ranges & inputs.

Wrapping It All Up

Before I pulled the trigger and signed up for the CSR, I did 2 things I’m sure many others don’t: I researched the perks and did the math.

Because of this, I know I won’t have buyer’s remorse. Instead, I am incredibly excited to have this credit card because I know I am earning way more value than the card costs me.

I will use this same 4-step process whenever I apply for other credit cards as well. Ignore sign up bonuses and perks I don’t care about. Calculate the true annual cost of the card. Determine the break even spending amount. And compare that break even amount to my actual spending.

I hope this was helpful. Let me know your thoughts on high-fee credit cards and if you personally have one.

The conclusions drawn throughout this website are not advice meeting the particular investment needs of any investor, and they are not intended to serve as the basis for financial planning, tax, or investment decisions. This website is for informational purposes only and is not a solicitation or an offer to buy any product, service, security or instrument. The opinions expressed throughout this website are my own and not those of any company I work for.