Chase Sapphire Preferred Ending 7% Yearly Bonus: My Thoughts

According to several blogs, including Deals We Like, Chase is ending the 7% annual dividend on all points earned for customers who applied for the card after July 20th, 2014. Current cardholders will see this benefit end in 2015, making the 2016 February statement the last time the dividend will be applied. To make up for this benefit deletion, Chase added two new benefits (H/T View From The Wing):

  1. Trip cancellation/trip interruption benefit increases from a $5,000 to a $10,000 maximum
  2. Rental car collision damage insurance waiver goes from secondary to primary.

These are nice benefits and Gary lays out the monetary valuation for business travelers very clearly.

I’d like to talk about the math in a different way, though. See, the 7% bonus makes every $1 spent $1.07 spent. This means that the bonus category spend, on travel and dining, really earns $2.14 per $1 spent. I’ve factored it out below:

$1 = 1.07, $2 = 2.14, $3 = $3.21, $4 = 4.28, $5 = 5.35, $6 = 6.42, $7 = $7.49, $8 = 8.56, and so on

Why did I stop at $8? At $8, the extra bonus becomes more than half of a dollar, and Chase rounds up. So, it’s an extra point earned!

Therefore, every $100 of bonused spend actually becomes 120 points. This makes the loss of the 7% dividend absolutely huge.

  • $100 = 107 points
  • 100/8 = 12.5 (13 with the roundup)
  • 107 + 13 = 120

At least, I think this is what happens, as Chase could only round up on the last dollar, if applicable, and not every $8. But, I don’t think any other blog has posted the math like this, so if someone disagrees or has better information, please leave a comment below!

If I am wrong, then the loss of the 7% bonus isn’t so bad. A new cardholder putting $10,000 on the card in a year earning, let’s say, 14,000 points, would now not receive a bonus of 980 points. That’s worth almost $10 as a statement credit or a bit more if redeeming through the Chase Ultimate Rewards (UR) portal for travel. It’s not exactly big money.

The signup bonus of the card is still 45,000 UR points after adding an authorized user and spending $3,000 in the first 3 months of card membership, making it an effective signup bonus of 48,000 UR points. This doesn’t change whether I’m right or wrong on the 7% bonus spend!

48,000 UR points is equivalent to $480 as a statement credit, $576 of travel credit when redeeming through the UR portal or 48,000 United Miles, British Airways Avios or Hyatt Gold Passport points. The signup bonus has been, and continues to be, the biggest reason to apply for the Chase Sapphire Preferred credit card. So, if you want this card, go get it. It’s free the first year and gives you almost $500 in value right off the bat!

 

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