topic Re: How can downgrading CSR to CSP possibly make sense? in Credit Cards

How can downgrading CSR to CSP possibly make sense?

kevinindy — Wed, 06 Mar 2019 17:21:28 GMT

I was looking at some of our cards to figure out the best setup for us. Read on here folks downgrading CSR to CSP. We have CSR and very happy with it but wanted to run some numbers. There was NO spend level where the CSP makes sense. Am I missing something, because it doesn't make any sense to me at all.

Here's my calculation:

Assumptions:

- $300 travel Credit used easily (it is super broad cannot imagine anyone not clearing this in a year.)

- Would not use either card for non travel/dining spend as both are below 2% citi DC which has no fee (and other 2% cards)

- Ignored Reserve Precheck and Priority pass value even though used both, some might not.

- Redemptions on travel portal where cash price is competitive with other sites. (Could do better than that by transfers but that would only make CSR look better.)

Annual Fee:

CSP=$95

CSR =$163.50 ($450 - $300 + $13.50) *$13.50 is value of 300 points not earned on travel due to credit

Travel and Dining Earnings in Excess of Double Cash/2%:

CSP = 0.5 cents per dollar spent (2pts x 1.25 multiplier - 2%)

CSR = 2.5 cents per dollar (3 pts x 1.5 multiplier - 2%)

Then just take Annual Cost divided by the card's excess earnings to get breakeven spend:

CSP = $95 / $0.005 = $19,000

CSR = $163.50 / $$0.025 = $6,540

Then just to see, I changed the point multiplier to assume transfers to partners, so the mutliplier would be the same. Most folks say around 2 cpp for UR optimized. To get them to be at the same breakeven (and the CSR would always be better beyond the breakeven) the UR value needs to be 2.557cpp. That's very strong.

If this is correct (and I believe it is) why do people take the CSP over the CSR, especially as a downgrade (I get the CSP year one AF is waived.)

Interested if others have calculated it differently.

Re: How can downgrading CSR to CSP possibly make sense?

wasCB14 — Wed, 06 Mar 2019 17:40:01 GMT

I strongly agree in general. A related thread I started: https://ficoforums.myfico.com/t5/Credit-Cards/Why-CSP/td-p/5436929

Perhaps someone has AUs who want rewards and some mid-level travel protections, but don't spend enough to justify a $75 AF per AU.

Re: How can downgrading CSR to CSP possibly make sense?

Anonymous — Wed, 06 Mar 2019 18:02:28 GMT

Excellent math, you should just get prople+wells visa and it would be better than both csp and csr.

Re: How can downgrading CSR to CSP possibly make sense?

NRB525 — Wed, 06 Mar 2019 20:26:12 GMT

It is certainly compelling math. I think the structure of the cards profile is limited, so with few other cards as variables this math works as is.

Where it gets complicated is if someone also has MR or AMEX rewards cards, Hilton, Marriott, Delta. The “annual travel credits” can begin to be overwhelming. Other Chase cards like Freedom and Freedom Unlimited could be used, with intent to transfer. In that more complicated setup, absolute AF cost becomes relevant. At least it does for me. I do not approach the CSP AF as something I am trying to earn out of, but rather a tool that enables transfer of UR points I have accumulated over the years.

Re: How can downgrading CSR to CSP possibly make sense?

calyx — Wed, 06 Mar 2019 21:03:00 GMT

@kevinindy wrote:

If this is correct (and I believe it is) why do people take the CSP over the CSR, especially as a downgrade (I get the CSP year one AF is waived.)

Interested if others have calculated it differently.

It doesn't answer the downgrade question, but I apped because I have sincere doubts that Chase would grant me a CSR with my credit profile right now, but I can benefit from the CSP/UR ecosystem.

Re: How can downgrading CSR to CSP possibly make sense?

iced — Wed, 06 Mar 2019 21:25:57 GMT

@kevinindy wrote:
I was looking at some of our cards to figure out the best setup for us. Read on here folks downgrading CSR to CSP. We have CSR and very happy with it but wanted to run some numbers. There was NO spend level where the CSP makes sense. Am I missing something, because it doesn't make any sense to me at all.

Here's my calculation:
Assumptions:
- $300 travel Credit used easily (it is super broad cannot imagine anyone not clearing this in a year.)
- Would not use either card for non travel/dining spend as both are below 2% citi DC which has no fee (and other 2% cards)
- Ignored Reserve Precheck and Priority pass value even though used both, some might not.
- Redemptions on travel portal where cash price is competitive with other sites. (Could do better than that by transfers but that would only make CSR look better.)

Annual Fee:
CSP=$95
CSR =$163.50 ($450 - $300 + $13.50) *$13.50 is value of 300 points not earned on travel due to credit
Travel and Dining Earnings in Excess of Double Cash/2%:
CSP = 0.5 cents per dollar spent (2pts x 1.25 multiplier - 2%)
CSR = 2.5 cents per dollar (3 pts x 1.5 multiplier - 2%)

Then just take Annual Cost divided by the card's excess earnings to get breakeven spend:
CSP = $95 / $0.005 = $19,000
CSR = $163.50 / $$0.025 = $6,540

Then just to see, I changed the point multiplier to assume transfers to partners, so the mutliplier would be the same. Most folks say around 2 cpp for UR optimized. To get them to be at the same breakeven (and the CSR would always be better beyond the breakeven) the UR value needs to be 2.557cpp. That's very strong.

If this is correct (and I believe it is) why do people take the CSP over the CSR, especially as a downgrade (I get the CSP year one AF is waived.)

Interested if others have calculated it differently.

There is a narrow window of spending - can't remember the exact numbers off-hand but I crunched them in a thread once - where someone will spend enough to break-even/come-out-ahead with CSP but not CSR. It's a pretty low and narrow range, something around $1,000-$3,000 per year in travel, slightly more if non-travel spend is used.

Once you're over that mark though, the CSR wins out and the gap only broadens. Below that mark and neither card makes sense.

Re: How can downgrading CSR to CSP possibly make sense?

iced — Wed, 06 Mar 2019 21:35:55 GMT

@Anonymous wrote:
Excellent math, you should just get prople+wells visa and it would be better than both csp and csr.

Better for WF maybe.

For people who travel frequently, points that transfer to airlines/hotels beat out points that don't, and by a signifcant margin. The ability to transfer points to partner is huge and is the reason programs like UR/MR remain the go-to programs with travelers despite the JV-squad banks trying to emulate their point accrual on their cards. When someone gets 4+ cpm value from an airline program, it's going to take a lot more than just 3x earning to win out with points-that-emulate-cashback systems like Wells and Capital One use.

Re: How can downgrading CSR to CSP possibly make sense?

kevinindy — Wed, 06 Mar 2019 21:41:30 GMT

I don't think there is even a narrow window of spending for it to make sense. Anyone that can get a CSP/CSR can get a 2% card I'd think, and if you use that as the baseline it literally NEVER makes sense.

As to people with lots of airline credits, I could see that, but the more restrictive airline credits would be the first I'd cut.

Re: How can downgrading CSR to CSP possibly make sense?

Anonymous — Wed, 06 Mar 2019 21:54:00 GMT

@iced wrote:
@Anonymous wrote:
Excellent math, you should just get prople+wells visa and it would be better than both csp and csr.

Better for WF maybe.

For people who travel frequently, points that transfer to airlines/hotels beat out points that don't, and by a signifcant margin. The ability to transfer points to partner is huge and is the reason programs like UR/MR remain the go-to programs with travelers despite the JV-squad banks trying to emulate their point accrual on their cards. When someone gets 4+ cpm value from an airline program, it's going to take a lot more than just 3x earning to win out with points-that-emulate-cashback systems like Wells and Capital One use.

Travel "frequently" is a bit different from travel "in style".

For people who travel international business, sure, they can put 120k+ MR/UR to a partner and claim 10cpp for a trip.

For people like OP who counts pennies in valuation (myself included), we book round trip ticket with 30k points, transfering to a partner on an economy seat will rarely beat 1.5cpp.

There is nothing wrong with each type of traveler, point is one has to consider what type they are in calculating valuations of these points.

And judging by chase CSR's valuation of UR on CSR, I bet they believe vast majority of people redeem these at about 1.5cpp.

Re: How can downgrading CSR to CSP possibly make sense?

iced — Wed, 06 Mar 2019 21:56:21 GMT

@kevinindy wrote:
I don't think there is even a narrow window of spending for it to make sense. Anyone that can get a CSP/CSR can get a 2% card I'd think, and if you use that as the baseline it literally NEVER makes sense.

As to people with lots of airline credits, I could see that, but the more restrictive airline credits would be the first I'd cut.

The window basically translates into someone who spends enough to earn between $95 and $150 in UR points per year after adjustments. Any less and neither card would make sense; any more and the CSR wins. It gets adjusted if the person does not spend at least $300/year in travel and how the person redeems points - someone doing strictly statement credits/gift cards (boo, but they do exist) is going to have a larger window than someone who redeems on the travel portal at 1.25x/1.5x, who in turn is going to have a larger window than someone who gets really good redemption rates on transfer partners (and that last group is probably a range nearing 0).

It is certainly a small range, but there does exist a place where spending $95/year to earn UR makes more sense to that person than spending $150-$450 to earn UR.

Re: How can downgrading CSR to CSP possibly make sense?

iced — Wed, 06 Mar 2019 22:13:20 GMT

@Anonymous wrote:
@iced wrote:
@Anonymous wrote:
Excellent math, you should just get prople+wells visa and it would be better than both csp and csr.

Better for WF maybe.

For people who travel frequently, points that transfer to airlines/hotels beat out points that don't, and by a signifcant margin. The ability to transfer points to partner is huge and is the reason programs like UR/MR remain the go-to programs with travelers despite the JV-squad banks trying to emulate their point accrual on their cards. When someone gets 4+ cpm value from an airline program, it's going to take a lot more than just 3x earning to win out with points-that-emulate-cashback systems like Wells and Capital One use.
Travel "frequently" is a bit different from travel "in style".

For people who travel international business, sure, they can put 120k+ MR/UR to a partner and claim 10cpp for a trip.
For people like OP who counts pennies in valuation (myself included), we book round trip ticket with 30k points, transfering to a partner on an economy seat will rarely beat 1.5cpp.

There is nothing wrong with each type of traveler, point is one has to consider what type they are in calculating valuations of these points.

And judging by chase CSR's valuation of UR on CSR, I bet they believe vast majority of people redeem these at about 1.5cpp.

For budget travelers, considering that one can redeem UR for 1.5 cpp in the Chase travel portal toward cash tickets, the floor for UR on travel redemptions is effectively 1.5 cpp.

I'll agree there is a flavor of frequent traveler who's first, last, and only priority in selecting travel itineraries is price and they will book in a hostel or fly in steerage if it saves them a buck. Even in those cases, I'd still argue there's value in having the option to either redeem at 1.5 cpp via the bank's travel portal or transfer to an airline in the event they find a ticket they like where they can exceed 1.5 cpp in value. Cards like WF Propel will not have that option.

Re: How can downgrading CSR to CSP possibly make sense?

Anonymous — Wed, 06 Mar 2019 23:39:25 GMT

@iced wrote:.

I'll agree there is a flavor of frequent traveler who's first, last, and only priority in selecting travel itineraries is price and they will book in a hostel or fly in steerage if it saves them a buck. Even in those cases, I'd still argue there's value in having the option to either redeem at 1.5 cpp via the bank's travel portal or transfer to an airline in the event they find a ticket they like where they can exceed 1.5 cpp in value. Cards like WF Propel will not have that option.

I agree, but I'm sure the counter is that the flexibility comes at a cost (the net AF) compared to the no-cost WF solution.

Re: How can downgrading CSR to CSP possibly make sense?

Anonymous — Wed, 06 Mar 2019 23:44:25 GMT

Options represent real oppurtunity, so i do agree its good, no matter how "common/rare" a better value may be.

Prople is by no means perfect. It has lot of shortcomings, no perks, no transfer. So yes it won't be good enough for many who want or need lounge access, or want insane redemption value for their luxury travels.

I would simply suggest everyone, who are debating which card to get, to try out award travel themselves for airline(s) and trips they use, see how often they get anything exceeding 1.5cpp.

Re: How can downgrading CSR to CSP possibly make sense?

CreditCuriosity — Wed, 06 Mar 2019 23:44:17 GMT

I have a CSR, but with that said which CC's other than amex for a charge offer primary rental car insurance? Could be a perk alone for a person to hold a CSP vs. a CSR without going into to much more detail if they can't swallow the 450 AF of the CSR?

Re: How can downgrading CSR to CSP possibly make sense?

kevinindy — Thu, 07 Mar 2019 03:00:28 GMT

I think there are limited cases, the rental coverage and the person who might be denied for CSR but get CSP make sense. However in your rental case, (a) that person would clearly use the 300 travel credit, (b) if the rentals were that substantive, their travel spend probably would make the CSR still better. I suppose I could concoct a scenario where a bunch of one day car rentals in town would be worthwhile for the CSP. But I don't think it would be realistic that people are doing that many rentals and not incurring other travel and restaurant expenses.

As to the idea there is a narrow band of spend that CSP > CSR, there isn't if you account for the fact that you can get 2% with a no AF card. By the time you covered the $95 AF on the CSP, you'd have more than covered the $160ish on the CSR.

I guess my overall point is that you have to look at the value vs a flat 2% card to really understand the marginal value. If you do that, other than qualifying for the CSR and a very improbable rental only spend, the CSP never makes sense. I still haven't heard otherwise if you you use a 2% card as the baseline.

What I need to do is compare the value vs. our citi costco card. Basically that ups the restaurant travel baseline to 3%, and I am struggling to see if the CSR makes sense at our spend levels. I think it does because of the lounge access (albeit crappy), car ins, and precheck. But it is closer than I would have thought when covering $163 net AF with a marginal 1.5 cpp on the CSR. The break even is close to 11K in that analysis.

Re: How can downgrading CSR to CSP possibly make sense?

Anonymous — Thu, 07 Mar 2019 03:21:12 GMT

Some people just want to dip their toes before jumping in the deep end. I would feel much better about throwing away $95 than $450 on an experiment.

I did my own math the other day to see if I could justify a CSP or CSR without travel spend and they both fall flat against my current deck of cards, especially if I add Marvel or Savor One, but I would still be far more likely to try CSP before CSR although with my income, CSP would be a better bet anyway since even though I have two 10K+ cards, Chase would be extremely unlikely to issue me over half my annual right out of the gate. The $95 risk is just much more palatable to me even if the approval component wasn’t in question.

Re: How can downgrading CSR to CSP possibly make sense?

wasCB14 — Thu, 07 Mar 2019 03:32:11 GMT

Re: Throwing away $95 vs. $450...

If someone can't use a $300 travel credit, why would he or she consider either of these? There are easier and better cash bonuses elsewhere, and as good as these cards are for travel, they're not particularly good for anything else.

Re: How can downgrading CSR to CSP possibly make sense?

Anonymous — Thu, 07 Mar 2019 03:43:34 GMT

@wasCB14 wrote:
Re: Throwing away $95 vs. $450...

If someone can't use a $300 travel credit, why would he or she consider either of these? There are easier and better cash bonuses elsewhere, and as good as these cards are for travel, they're not particularly good for anything else.

I agree and I was only really looking because I was bored and because I am looking at a Chase card as an addition to my wallet in case my situation changes later and I can travel but I really don’t know that there is a place in my wallet for Freedom when I can’t even max out my Disco categories so I was looking at my options.

I could potentially use the $300 credit if it covers Uber/Lyft. I found conflicting info on that but I simply don’t eat out or travel enough to make the reward system work for me right now.

Re: How can downgrading CSR to CSP possibly make sense?

wasCB14 — Thu, 07 Mar 2019 04:03:15 GMT

I got credit for some Ubers in June.

*To clarify, my point was that for anyone who travels, the net AF "at risk" is less than $450. That's without even considering the value of the bonus.