Posts: 3,367
Registered: ‎10-19-2012
Re: Is the Chase Sapphire Preferred worth carrying permanently?

mikka1 wrote:

Just will try to add my 2cents to the discussion...


First, I think we need to separate two types of comparison:

1) Compare CSP with hypothetical portfolio of other cards

2) Compare CSP with one specific card


If we are talking about #1, then I'am almost 100% sure we will quickly find a combination of 3...4 or more cards (even no-AF ones) that will economically be better than CSP alone. If we also take into account cards with rotating categories, CSP will lose this battle for sure. 

Although I think that this comparison is not 100% fair. It is cherrypicking and I doubt an average consumer (one who doesn't spend all nights long on myFico :-) ) will be able to properly handle all those cards to maximize his gain. CSP is more positioned (at least in my view) as a kind of "everyday use card"...


Talking about #2 I would try to compare it with BofA 1-2-3 Travel rewards (1.5% cashback on all purchases). One feature they have in common is zero foreign transaction fee, so even if travelling with those 2 cards (CSP and BofA Travel) they will be more or less equal. So, the only remaining calculation we have is to subtract BofA cashback of 1.5% on all from assumed weighted average of CSP cashbacks (if you plan to spend half on 2pts categories and half on 1pt it will then be 1.5pts on average which will lead to 1,605% with 7% bonus) and divide $95 by that number. So, in the case above it will be 95/(1.605%-1.5%) = $90 476.

Now, we can play around with spending patterns. Assuming that all spend will be in 2pts it will be 95/(2.14%-1.5%) = $14 844 - much better already!


And finally, we need to determine how your spending pattern (travel&dining vs other spend) should look like to get any gain at all (just looking for a theoretical point).

Let X be the share of your spending for travel&dining, then solving the following equation for X:

x*0.02 + (1-x)*0.01 = 0.015 / 1.07

we come up with X = 40.2%


What it means is that if the share of your spending on travel & dining on CSP is less than 40%, than it will NEVER be better than BofA 1-2-3 Travel rewards. 

More you spend on travel&dining relative to other categories, less you need to spend overall to make any gain compared to BofA 1-2-3 Travel rewards. 

Another interesting result is that even if you have no AF for CSP (for the 1st year) in order for it to be better than BofA 1-2-3 Travel Rewards you need to maintain at least this 40/60 split for travel&dining vs other spending. Otherwise BofA is better for you...


It seems I don't really want CSP anymore after these calculations Smiley Happy))))))))) Maybe only for a sign-up bonus :-))))


Edited: a couple of typos fixed

Nice math! 


Couple of comments:


The BankAmericard Travel Rewards card (1-2-3 refers to the BankAmericard Cash Rewards) actually gives you 1.65 points if you have a BofA checking account.


Even at 1.65, this card is overall not as beneficial as the Fidelity. Let's say you spend 10k a year, then the difference in cash back between these cards would be 10,000x0.35%=$35. The FTF on the Fidelity is 1%; so you'd have to spend $3.5k in a foreign currency to offset the cash back disadvantage. Given that spending upward of 3.5k in a foreign currency is less likely than spending upward of 10k overall, I'd have to give the Fidelity the advantage. Since both cards do not carry an annual fee, the Fidelity would be a more worthy benchmark don't you think? Smiley Wink


It seems that you forgot that UR points are worth more than US cents. They should be valued at 2 cents; this really is the biggest advantage of the CSP over almost any other card. So the output numbers are not quite right.