How can downgrading CSR to CSP possibly make sense?

[kevinindy]

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.

[wasCB14]

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.

[Anonymous]

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

[NRB525]

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.

[calyx]

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@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.

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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.

[iced]

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@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.

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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.

[iced]

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@Anonymous wrote:

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

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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.

[kevinindy]

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.

[Anonymous]

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@iced wrote:

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@Anonymous wrote:

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

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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.

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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.

[iced]

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@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.

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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.