First things first. I am from Europe and we call it football. What you have in America is american football ! And what you see on the photo is team Greece vs. team Belarus. Ok, now on to my point. We will have a soccer match, but between credit card teams. The arrangement is a bit unusual, because there are only 2 players on each team and there are twins , playing against each other. The prize is middle class family’s credit card spending. Confused? Remember my Monday’s headache post? It’s nothing, compared to this puppy!
Team number 1: Chase Sapphire Preferred and Chase Freedom Visa.
Team number 2: Chase Freedom Mastercard (the twin) and Amex Blue Cash Preferred.
The arrangement number 1 is considered the most lucrative for those, who collect miles and points. And I would have to agree. It’s a powerful combination, because you can take advantage of Freedom’s rotating 5 percent categories and transfer the points to Ultimate rewards, which are more valuable. In turn, you can convert those points to miles in several airline programs on 1:1 basis.
Non-bonus spending through Freedom earns 1 percent cash back. Chase Sapphire Preferred earns 1 Ultimate rewards point per dollar, 2 points on dining and travel. It comes with a 95 dollar annual fee. You hear very often, how it’s worth every penny and than some.
Let’s find out whether it’s worth it for a middle class family, shall we? First, we’ll ignore travel earning and assume we will use points for that. So lets take an average middle class family, like mine, and break down annual expenses by category.
1) Groceries: $500 a month, or 6000 per year.
2) Gas: $300 a month, or 3600 per year.
3) Dining: $400 a month, or 4800 per year
4) Amazon : $100 a month, or 1200 per year
5) Drug stores: $100 a month, or 1200 per year
6) Everything else: $600 a month, or 7200 per year.
Grand total is $24000, which is close to what an average family spends per year. That’s about what we put on credit cards annually.
SOCCER TEAM GREECE:
Now lets calculate how much we can earn in rewards, using combination number 1. We will use Freedom for bonus categories and Sapphire Preferred for everything else. Look at Freedom’s rotating bonus categories table at the bottom of the page, for reference.
1) Groceries: it’s not a bonus category anywhere. So we would get 6000 in Ultimate Rewards per year.
2) Gas: bonus category in 2 quarters. We would have 9000 Ultimate Rewards from that. Add 1800 points from the other 2 quarters. I realize, you can buy gift cards for the rest of the year. But my husband does not like to be tied down to a particular station. So let’s ignore that assumption. Total 10800 points.
3) Restaurants: bonus category in one quarter, so would net 6000 points from Chase Freedom. Plus about 7200 points from Chase Sapphire Preferred during the rest of the year, since it earns 2 points on dining. Total 13200 points.
4) Amazon: gift cards can be bought at Lowes, CVS and some gas stations, which are Freedom’s bonus categories in all four quarters. You can buy them, as you need them. So, let’s say 6000 points per year.
5) Drug stores: bonus category in one quarter. Let’s ignore the fact, that you can stock up ahead with gift cards. Most families will not go through the trouble. So, 1500 points plus 900 from the rest of the year. 2400 total.
6) Everything else: 7200 points per year for simplicity. I realize, some expenses may fall under Kohl’s when it’s a bonus category and so forth. Most will not maximize it, though.
Grand total for the year: 45600 Ultimate rewards. Chase Sapphire Preferred gets a 7 percent dividend on all earned points. I have to add the percentage on the amount I would have put on it for non-bonus spending. So that would be 1617 points or 7 percent dividend, according to my calculations. 45600+1617=47217 Ultimate rewards. Pretty good!
SOCCER TEAM BELARUS:
This is a second combination of Chase Freedom and Amex Blue Cash Preferred. We don’t get points but cash back in this case.
1) Groceries: $360 since Amex gives 6 percent cash back on up to 6000 dollars per year.
2) Amex earns 3 percent back on gas. So, if we used it for half a year, it would get us $54 for the non bonus quarters. The other 2 through Chase Freedom would give us $90. Total $144
3) Dining: $60 from the Freedom’s bonus quarter, $36 from the rest of the year. Total $96
4) Amazon: same principle as combination in the example of the 1st team: $60
5) Drug Stores: same principle. $ 24
6) Everything else: same as combination number 1, though Amex does give 3 percent on department stores. But to keep it simple, lets say $72 per year, or 1 percent cash back.
Grand total: 756 dollars. That’s over 3 percent in cash back overall, since the annual spending is $24000 per year.
So we have 47217 Ultimate rewards points from option number 1 vs. $756 from option number 2. Also CSP annual fee is $95 vs. $75 for Amex Blue Cash Preferred . So if we add the difference to the cash back option, it would be 47217 Ultimate rewards vs. $776 (+20).
So which one should you pick? Well, if you go with the option number 1, you are paying 1.643 cents for each Ultimate rewards point: 776 divided by 47217. You could transfer those points to United miles or Avios. But if you have a family, like mine , it would be very hard to redeem miles in economy and beat 1.64 CPM (cents per mile). My average redemption comes closer to about 1.5 CPM. Some routes will beat that percentage, but not for most families.
Also, keep in mind, very often Chase Freedom has special redemption on gift cards at 10 and 20 percent off . If you are willing to buy those cards at face value for graduation or wedding gift, you have to consider that as well. And Chase currently does not run any bonuses on transfers to points or miles. By that logic your cost for Ultimate rewards point would be even higher.
You might get a slight discount by transferring to Rapid Rewards points in Southwest. That’s because you can get around 1.9 cents in flight value per point on certain fares. But then you are tied to just one airline with their pricing and schedule. You also risk devaluation, since you are putting all of your eggs in one basket.
Would you really spend a whole year, jumping through all the hoops mentioned, to bet on just one airline? And some don’t live near Southwest hub. Incidentally, after March 31st 2014, 1 Rapid Rewards point will only get 1.43 cents in value. This change was not yet announced, when I wrote this post. Besides, currently we fly free with all the miles and points, we have accumulated through sign-up bonuses. That is where the real prize is for a middle class family.
There is no question, that for a frequent single traveler or those, who value premium redemptions, it might be worth it to pay 1.64 cents for Ultimate rewards point. But for most families with limited savings, it’s best to have cash through regular spending, in case an emergency comes up. And when you have kids, something will happen, guaranteed. I value Ultimate rewards at 1.25 cents each, which is what I would pay for it. So for me the winner is the second team, though there are some exceptions, as in the case of Avios program. Read my post on it HERE
So, what do you think ? Did I miss anything?
Activate every three months for 5% cash back on up to $1,500 spent in 2013 bonus categories:
January – March
April – June
July – September
September 14, 2013
September 15, 2013
Leana is the founder of Miles For Family. She enjoys beach vacations and visiting her family in Europe. Originally from Belarus, Leana resides in central Florida with her husband and two children.