Chase Ultimate Rewards System

Here's the topic that started it all.  Starting about 5 years ago in 2015, I finally got "serious" about earning miles with the goal of traveling in style, hoping that eventually I'll have enough points to book my wife and I in business class to Europe.

Fast forward to today, we've achieved my goal three times, flying round trip to Europe, experiencing intercontinental business class on SAS, Air Canada, United, Brussels Air and Air Austria.  I never thought I would start being a connoisseur of business class, but we've definitely started to develop preferences and as I've said before, once you experience premium travel, it's tough to go back.

Thanks to my wife talking up our trips to some friends, they started requesting me to teach them my system.  I presumed it was a joke for a while, but through further persistence, they finally convinced me that they were actually serious.  I put together some slide, and very awkwardly gave a PowerPoint lecture in my living room to more than ten of our friends actively taking notes and asking questions.  Since then, I've fielded phone calls on earning and using points, advised on booking flights, and love it!

Today, I'm going to share the Ultimate Rewards side of my program with you.  There is also a United MileagePlus side of my system that I'll cover in another posting.

The Cliffs Notes Version:

Earning Points through Credit Card Spend

>Chase Sapphire Reserve - Use for Travel & Dining

>Chase Freedom - Use for whatever the rotating 5x category is

>Chase Freedom Unlimited - Use for everything else

>If you have a business - Chase Ink Business Cash - Use for phone, cable, and office supply stores

Using Points:

>For maximum value, transfer to airline partners

>You can also book travel through the Ultimate Rewards Travel portal for a decent return, but obviously, I'd prefer you talk to me on the journey, and we can consult on getting you there with points on business class.

Is this system for me?

1. I pay off my credit card balance every month

First, I want to make sure I'm advising you in a financially responsible way.  To get the value out of this system, I want to make sure you don't carry a credit card balance from month to month.  If you're paying interest on your credit cards, that cost will very quickly exceed the benefit you'll receive from this system.  I'm not a Dave Ramsey type, and strongly believe in using credit and debt to your advantage, but the math is easy if you're paying 15-20% in interest every month on your credit card balance, that quickly exceeds the opportunities around getting 1.5-3% in points.  Even at the returns I've had on points, I want to stress not carrying credit card debt.

2. I have good/excellent credit.

The critical card to this system is the Chase Sapphire Reserve.  According to cardrate.com, the average credit score for approval is 766.  While Chase has their own algorithms, and reportedly the lowest approved credit score was 580, success if much better if your score is above 780.  The other aspect is if you currently aren't using any of the Chase cards today, you will need to apply for and open multiple accounts, which will also further decrease your credit score.

3. I'm interested in travel.

This one seems a bit obvious if you're reading this on my site, but to get the real value out of these points, you need to transfer them to one of Chase's travel partners, or use Chase's travel portal.  If you don't travel, I'd consider a maximized cash back system.  Chase could still be the answer, but there are a number of other good options such as the Citi Costco card or Double Cash.  We'll assume you're here to travel, so on to the next criteria

4. I'm willing to annoy my significant other with a "complicated" credit card system

Yes, this is one of the bigger areas of marital discord in my life, as since starting this system, I've been required to provide a quarterly updated post-it note on what card to use for what.  However, I ask her whenever we sit in business class in her lay-flat seat on our way to Europe if it was worth it, and we're still executing the system today, so there's your answer.

5. I spend more than $5000 per year on travel & dining, and at least $300 in travel only

This works out to a little over $400 per month, so it's not too tough to get there but it's not for everyone.  There are various ways to do the math on this, but for me, it's about recouping the $450 annual fee on the Chase Sapphire Reserve, against the next best cash back alternative.  The first $300 is super easy since Chase offers direct reimbursement of the first $300 spent in the travel category annually, and again, since you're here, so I'm assuming the travel part is easy, particularly as Chase very broadly defines travel, from hotels, cruises, to even Uber and public transportation.

While there are a lot of other reasons to keep the Sapphire Reserve thanks to high value perks, let's assume those are free.  For all non-travel & dining categories, the Reserve gives 1x Ultimate Rewards, which is worse than Freedom Unlimited, so it's only useful to use on the 3x categories.  Assuming a baseline earn of 1.5x, that means you get 1.5x more points on dining & travel, basically a Points Above Replacement (PAR, thanks sabermetrics), so at an average valuation of $0.02 per Ultimate Reward point, you need to spend $5000 to break even.  Source: math.

Getting Started

If you answered yes to all of the above questions, and managed through my semi-math paragraph above, congrats, and welcome to the family of Chase Ultimate Rewards loyalists!  To get started you're going to be opening credit cards, and one of the advantages of the Chase system is the sign-up bonuses.  To get each bonus, you need to use the new card for a certain amount of spend, within a certain period of time.  For example, the current (May 27, 2019) sign-up bonus on the Reserve is 50k bonus points after spending $4000 on purchases in the first three months of having the card.  With that, you likely want to space out opening these cards to ensure you get the bonus.  In this one case, the difference between spending $3999 and $4000 is 50k points, so you definitely want to make sure you hit the spend.  Also, with the Reserve and regular Freedom card, you want to do everything you can to make sure the spend is in the bonus categories, as if you have to use 1x points per dollar, you're leaving a small number of points on the table.

Currently, the Freedom Unlimited has a great start up offer.  While there is no sign up bonus, they are offering 3x Ultimate Rewards points for the first year up to $20k in spend.  This is an incredible offer, and aside from getting the Sapphire Reserve for other perks, I would definitely work to maximize this offer.

The 5/24 rule

For most people this doesn't matter, and if you know what the 5/24 rule is, you're probably reading the wrong page anyway.  Chase does limit people cycling cards for the sign-up bonus, and there is a well established rule that you can only get 5 bonuses in a 24 month period.  Personally, I've never run into an issue, but for a variety of reasons, I've chosen not to close an open cards just for the sign up bonus.  Yes, I'm potentially leaving money on the table, but for the hassle of closing and opening accounts, unfreezing and refreezing my credit due to identity theft issues, it's not worth the hassle.  For most people, this won't be a problem.

The Earn

As I mentioned in the Cliffs Notes version above, earning miles via spend is not much more complicated.  If you're buying something in dining or travel, use the Sapphire Reserve Card.  There are a number of other perks such as quality travel insurance that make Reserve the preferred card for anything travel.

Track the Freedom rotating categories, sign up here, and use the Freedom card for the first $1500 of spend each quarter in the given category.  Note, if travel or dining is the rotating category, max your $1500 first in the Freedom before using the Sapphire Reserve again.  It does happen on occasion.  Pro Tip:  My wife and I both have Freedom cards with the $1500 5x reward limit, so we get $3000 per quarter.

More important Pro Tip: Occasionally, the Freedom rotating category involves places that sell gift cards, such as grocery or drug stores.  In that case, we wait until the end of the quarter, and spend the rest of our $1500 limit on Amazon gift cards (we are extreme Amazon loyalists).  At this point, Amazon is very rarely on bonus miles, so getting 5x at Amazon is extremely valuable to us.  While we are pre-paying our Amazon bill, getting 5x makes it worth it to us.  Literally, your mileage may vary, but gift cards count as the store they are purchased in, not the venue they are purchased for.

For everything else, use the Freedom Unlimited, particularly if you're on the current sign-up bonus of 3x per dollar spent.  That's a great value right now!

If you have a business or ability to apply for a business credit card, there are a number of Chase business cards that also offer Ultimate Rewards points with some additional categories offering more than 1.5x per dollar.  My preference based on differentiation from the above described consumer cards is the Chase Ink Business Cash card.  The Ink Business Cash offers a stable 5x on my cable, internet, phone, as well as office supply stores.  The Ink Preferred is also a favorite, however it adds a $95 annual fee, and replicates a lot of the Sapphire Reserve categories.  The additional categories that increase the earn (3x) are social media and search engine spending, as well as shipping, up to $150k.  If that appeals to you, great!  If not, I hope you skimmed this paragraph.

One other note regarding Sapphire Reserve: due to the number of additional perks associated with the card, additional users incur a $75 annual fee.  However, unless you and your potential additional user typically dine out separately or book travel separately, there is little reason to get the second card.  For us, we only have the primary card, and I'm the card holder as due to my job, I travel more independently, and get more value out of the Priority Pass airport club access.  Note: for the Global Entry credit, Chase doesn't check who is applying.  My wife had her $100 application fee waived by my Sapphire Reserve card.

The Redemption

On their own, Freedom and Freedom Unlimited are cash back cards, with a few other options, such as occasionally discounted gift cards.  However, the magic of the system comes from the Sapphire Reserve.  You can consolidate your Ultimate Rewards points into your Reserve account, and open up a number of other possibilities of greater value.  The most direct method is booking travel through Chase's travel portal, which through a Reserve account is worth 50% more.  For example, you can book a $1500 flight thought Chase for 100k in points, which would be worth $1000 in cash back.

The real value is through Chase's transfer partners.  There are currently 9 airline partners and 3 hotel partners that you can transfer your points 1:1, and the transfer for the most part is immediate.  The Points Guy recently did a great article on this, and reviewed a number of transfer examples.  The current air transfer partners are British Airways, Flying Blue, JetBlue, Southwest, Singapore, United, Virgin Atlantic, Aer Lingus, and Iberia.  The current hotel partners are Hyatt, IHG, and Marriott.  Also thanks to The Points Guy, here is a valuation of the average redemption value of the points, showing airlines can bring a lot more value than even the 50% redemption bonus on Chase's portal.

While a number of airlines either currently utilize or are transitioning to a revenue based redemption system (e.g. on Southwest, points are also consistently worth 1.5x, meaning you can book a $300 flight for 20k or $200 worth of points), there is still huge value to be had booking premium class intercontinental flights on points.  As has been my system, I recommend booking a cruise or other trip, and then mark your calendar for ~335 days out, and begin your air search.  Particularly through Star Alliance Partners, points are determined by location of origin and destination.  Here's a site to help you calculate the points for such a trip.  For example, let's pick the USA as our origin and Europe as our destination.  That would be 70k points (one-way) for business class for the saver award.  How about USA to north Asia (e.g. Japan, China, etc.)?  That's 80k points for business class saver.  There are always "everyday awards" that are typically double the number of points, but I would advise holding out and continuing to search for saver awards.  While $2800 is still likely a discount to face value of a round-trip business class ticket, we're all about getting maximum value here, so why not keep searching?  Don't get me wrong, I'm a huge fan of United's Polaris intercontinental product, but I'm also a bigger fan of maximizing value, so I search for the best way to get to my destination with the best experience possible.

So, here's how I work this: I look for the flight I want on United.com (again, I'm United committed for my international travel, so insert your preferred airline here), begin the booking process using points, and get all the way to check out, then switch over to Chase and move the exact number of points to United to complete the transaction.  Awards travel changes quickly, so you need to keep trying to find the flight you want via saver travel, and whenever you find it, book it!  Just like booking a cruise or airfare with me, rates can change quickly, so if you find what you want, lock it in to keep the rate.  Since my points have more versatility in Chase, I store my points there rather than preemptively moving to United.  One note here, Chase points only move in 1000 point increments, so you'll likely need to move slightly more points than you need.

That's it!  From a points earn (via credit card spend) and redemption, that's how we've managed to get to Europe for "free" three years in a row, with plans to continue in 2020.  Best of luck in points accumulation and redemption, and let me know how I can help!

-Jared

Disclosure: The links above are to open the indicated credit cards, and if you use them to sign up, I will benefit financially via Chase.  That said, this is the exact system I use, and am open to helping you with your questions as you get starting in the Ultimate Rewards System.


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