An in-depth analysis of popular cards

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freyj6
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An in-depth analysis of popular cards

Postby freyj6 » Wed Nov 26, 2014 3:12 pm

Most of the reviews I come across on blogs are pretty surface level, i.e. "this card has a good rewards rate and is good for travel so you should get it" *insert affiliate link*.

So I figured I'd go into a little more depth with a few of the most popular cards and talk about who should get them, and when they're actually worth getting vs the next best thing. I'll mostly look at their long-term usefulness, since any card with a ~40k sign-up bonus is worth getting if you're churing.

Let's start with the Arrival+

*edit* Now that the Arrival+ offers a rewards rate of only 2.1, it's far less useful. You'd now have to spend over $80,000 a year on it (AND fail to use other kinds of points effectively) to be able to justify the annual fee. This card is really only useful for churning now.

Pros:
-2.27 rewards rate (I'll explain)
-Ease of use of points
-Big sign-up bonus
-Downgrades or retention offers available
-Free fico score
-Getting statement credits rather than paying with points means that you can accumulate more miles from each airline when you book flights

Cons:
-$89 annual fee
-Somewhat bad customer service

So the main draws of this cards are a high rewards rate for uncategorized spending and a nice sign up bonus. The reason the rewards rate is 2.27 is because not only do you get 10% on your 10% (making it 2.222) but because you earn on your reward travel which you don't actually have to pay for.

For example, say you only have $10,000 in your bank account. If you spend $10,000 on your Arrival+, you get 20,000 points, or 2%. Now you book a flight for $200 (20,000 points) and get 2,000 back (10%) making it 2.2 (if you were to continue in this way, you'd keep getting 10% so it's 2.222). But the thing most people don't realize is that you also get another 400 points (440 or more with the 10%) from the flight you booked. So, $10,000 spent, ~$227 earned in travel, or 2.27.This benefits the sign up bonus as well.

The other draws are the fact that you don't have to waste time playing the points game and looking for award flights (although some find it fun), free fico score (although also offered by discover IT, Mint.com and I think Sallie Mae), ability to accumulate more airlines miles by actually paying for the flight and then redeeming statement credit, and the fact that big spenders seem to be able to get the annual fee waived if they call and speak to a manager, and others can downgrade to the regular Arrival, and still keep all their points and get 10% back.

The downside, however, is that the $89 annual fee makes the card hard to justify over cash back cards except for the biggest spenders. And yes, Barclay's customer service is pretty bad.

Who Should Get Arrival+?

-Anyone who travels and wants to get the sign-up bonus and then downgrade

-Anyone who spends over 40k a year in uncategorized spending and doesn't like the hassle of dealing with complicated point systems, OR can't get a high enough value out of point (roughly 1.5 cents or more, explained below).

-Anyone who puts a lot of value on intangibles like ease of use or free fico score.

Who Shouldn't Get Arrival+?

-Anyone who spends less than 40k a year and isn't just getting the card for the sign up bonus (Double Cash earns more if you spend less than 40k).

-Anyone who doesn't travel, or puts a lot of value on customer service

-Anyone who can consistently get really good value out of UR or MR points -- approximately 1.5 or greater.

-Anyone who does lots of manufactured spending

If you spend enough to justify getting Arrival+ over Double Cash (40k in uncategorized, so probably well over 60k total) then the real question is what kind of value you can get out of UR or MR points.

Let's start with MR. Rather than go into all the AMEX cards, I'll focus on the EveryDay Preferred because with it's potential 1.5 points in uncategorized spending, it's AMEX's best uncategorized card and therefore competes most directly with the Arrival+. As mentioned, the Arrival+'s rewards rate is 2.27 and the Everyday Preferred's is 1.5, so you need at least 1.5 cents per point to get a rewards rate of 2.25 and be comparable. Although that's slightly lower than the Arrival+, the fact that you'd be getting 6.75% back on groceries at that rate would put the EDP card ahead. 1.4 cents per point would be 6.3% on groceries, which is still over 1% higher than any other no-fee card. So if you can get a value of 1.4 or more out of MR and don't mind the added complication, EDP is better. If you can't, Arrival+ is better. The only real exception would be if you spend very little on groceries and mostly eat out.

UR points are more complicated because of the option to transfer points from your Freedom card. So if you get a value of 2 cents per point, just spending 2k a year on Freedom would essentially erase the annual fee. But the important thing is not just whether CSP or Ink is worth it, but whether they also make Arrival+ useless, because some big spenders can benefit from both. Assuming you're spending 40k+ a year in uncategorized (otherwise you'd just get the Double Cash instead of Arrival+) the Arrival would be worth keeping in addition to a UR card even if you got a value of 2 cents out of UR points -- unless you don't travel enough to use all the points. So for a UR card to accual make the Arrival+ not worth getting for big spenders, you'd have to consistently get a value of 2.3 cents per UR point. That's not to say that Arrival+ is BETTER if you don't get that kind of value, just that it is still useful to big spenders up until that point.

Whew.

So for TL;DR: get Arrival+ if you're a big spender and can't get great value out of points, or you want the sign up bonus.

Cheers -- I'll post up some other cards soon.
Last edited by freyj6 on Thu Dec 17, 2015 9:22 pm, edited 1 time in total.
Current Strategy

Chase Freedom + Discover IT + Churning


Cre
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Postby Cre » Wed Nov 26, 2014 10:32 pm

This is an incredible post. Please keep it up.

I'm still re reading the second paragraph on the 2.222 versus 2.27... give me another 2.2 years, and maybe I'll understand it. In the meantime, I'll keep reading it for the 2,222nd time. Then, and only then, will I ask for the cliff notes.

Seriously, great job.. thank you for sharing your analysis.
Current Cards:
AmEx Platinum Charge: NPSL, $450 AF
AmEx Reserve Credit: $30K limit, $450 AF
Chase Slate Visa Credit: $32K limit, No AF
Future Strategy:
Near Term: Need a good MasterCard for places that won't accept AmEx or Visa
Long Term: Will downsize out of one or both current AmEx cards to reduce AFs

freyj6
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Postby freyj6 » Wed Nov 26, 2014 11:38 pm

^Thanks man. With the rewards rate, you basically get points for money you don't actually have to spend, because you redeem the points as statement credit. The same is true for any card that you can redeem for statement credit though.
Current Strategy

Chase Freedom + Discover IT + Churning

freyj6
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Postby freyj6 » Thu Nov 27, 2014 1:00 am

Alright, second one. Here we go. I'll focus on the EveryDay Preferred here (EDP) but this will really be more of a "which is the best grocery card" kind of post.

The EveryDay Preferred

Basically this card is a 1.5/3/4.5 MR point card as long as you make 30 transactions a month. Not as complicated as it sounds.

Pros:
-Potentially the highest rewards rate on groceries and very high on gas
-Potentially a very good uncategorized spending card

Cons
-30 transactions is a hassle, especially if you have several other cards that you might want to use for category bonuses, dining and travel.
-Has a foreign transaction fee, so useless abroad
-Low sign-up bonus compared to similar cards
-Only useful if you can get good value out of MR points
-$95 annual fee

So the big thing this card has going for it is it has the potential for a ridiculous rewards rate if you can get good enough value out of MR points. Say you regularly fly a short-haul domestic route that's relatively expensive to buy outright. Transferring points to British Airways Avios and getting the flight for 4500 or 7500 could potentially mean a value of 2-3 cents per point. So if that kind of flight is useful to you, especially if it's one you have to take regularly, you're looking at between 3/6/9% and 4.5/9/13.5% back, which is ridiculous. There are sometimes MR->BA transfer bonuses, which can make this even more.

So that's where the card shines. If you can get value like that, it blows all other grocery cards out of the water. And most other kinds of cards too.

However, if you're only able to get about 1 cent per point, the card is completely useless. Up until about 1.3 cents per point, the Blue Cash Preferred is much better. At 1.4 or so, the EveryDay Preferred starts to shine, both as a groceries card and as an uncategorized spending card. So that's really the crux of whether this card is worth it -- can you get a value of 1.4 cents or more from MR points consistently, and can you always hit 30 transactions a month.

Even if you can get that kind of value, it's important to take into account two major drawbacks: 30 transactions required and foreign transaction fee. The card has a FTF, so if you're spending a lot of time abroad, you'll have to use other cards. And any time you're spending enough time to abroad to make 30 domestic transactions tough, you risk not getting the 50% points bonus, which also generally makes the card useless. Yes, you can buy 1 gallon of gas 10 times at the pump or buy a bunch of $1 gift cards, but that's a huge pain in the ass. The 30 required transactions are also painful if you want to use other cards for category spending, dining, etc.

Who Should Get EDP

-Virtually anyone who can average 1.4+ cents out of MR points and average 30 domestic transactions.

-People who fly enough on those valuable routes that they'll actually be able to spend 100,000 MR points or more a year and still get that rewards rate.

-People who don't mind the complication of point transfers and award booking.

-Those who don't spend a lot of time abroad

Who Shouldn't Get EDP

-Anyone who can't get a value of 1.4 cents per point or greater out of MR.

-Anyone who doesn't travel, or doesn't travel valuable award routes enough to go through a large amount of MR points.

-Anyone who spends a lot of time abroad.

-Some people who spend very little on groceries and can't get high enough value out of MR points to justify the $95 fee based on uncategorized spending alone.

-Some people who spend a ton of flying and would do better with PRG.

-Anyone who doesn't want to deal with the hassle of making 30 transactions and making complicated point transfers.

Again, the most important point is whether you can get a value of 1.4+ cents out of the MR points. If you can, it would be hard not to be able to cover the annual fee with that value. With a rewards rate of 6.3% on groceries and 2.1% on uncategorized, most people would cover the value of the card. You'd have to spend ~$4500 or less on groceries and have Sallie Mae and Citi DoubleCash to make it not worth it. And if you get up towards 1.5 or 1.6 cents per point, it would be very hard to justify not getting this card based on the rewards rate. If you spend a ton of flights, PRG may be a better choice, but unless your grocery spending is extremely low, most people would still do best to get both.

However, there are some non-reward related issues with this card that could make it worth avoiding for some people, even if you can get decent value out of MR.

Essentially, it's a big ****ing hassle. Transferring MR points can be somewhat tedious, and when you get into using partners of partners (like using Avios to book Alaska award flights, where you actually have to call in to do it) it gets even more complicated. As mentioned, 30 transactions is also a hassle, and the fact that this is an everyday spending card means you're going to have a ton of MR points, which requires you to be able to get good value not only on an occasional flight, but regularly. This could be a big problem for people who don't travel a lot, those with huge spending levels, or people who just don't fly routes that are conducive to getting high value out of MR points. And finally, you can't really use this card abroad because of the FTF.

So that pretty much sums up the EDP: from a rewards standpoint, it rocks if you can get 1.4+ cents out of MR points. If you can get 2+, it really, really rocks. But it's also one of the most complicated and high maintenance cards out there.

==============================

Whew. Let's wrap up with a quick discussion of grocery cards as long as were here. As I mentioned, if you can get a value of 1.4 cents or greater from the EDP, it's pretty much king. But let's look at different grocery spending levels and what cards are best.

<$3000 - For groceries only, Sallie Mae wins here because it has no annual fee, unless you can get a value of 1.8+ from MR points on the EDP. However, since a value of 1.7 cents would give you an uncategorized rewards rate of about 2.5, EDP wins from about 1.7 cents on.

$3000-4500 - Sallie Mae + Blue Cash Everyday win here, unless you're getting a value of about 1.4 or greater out of MR.

$4500-6000 - The Blue Cash Preferred wins here, unless you're getting that 1.4+ value out of the EDP.

$6000-10500 - BCP, BCE and Sallie Mae win here, but if you're getting that 1.4+ value go with EDP + regular Everyday card + Sallie Mae

$10500-12000 - Definitely get BCP, and if you can get a value of 1.4 or greater, go with EDP as well. If not, get Sallie Mae and BCE.

$12000-25000 - If you can get the 1.4 value again, go with BCP, EDP, regular Everyday and Sallie Mae (And even add BCE too if you're up around $25000). If you can't get that value, go with BCP + Sallie Mae + BCE.

A few other factors come in here. First, Chase Freedom offers 5% on up to $1500 in groceries about once every two years, which can be turned into 7.5-15% with UR transfers. So you could feasibly consider that $750 a year and factor that in.

Also, some people use Chase Ink for buying Whole Foods gift cards, which obviously works extremely well if you shop at Whole Foods. There are lots of manufactured spending tricks, but I'm mostly ignoring MR in these posts.

And finally, for extremely high grocery spending (which would probably be pretty unusual to achieve without MR) the old Blue Cash card is another option.

Cheers :)
Current Strategy

Chase Freedom + Discover IT + Churning

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lobbythis
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Postby lobbythis » Thu Nov 27, 2014 2:32 am

Nice analysis. Thanks for taking the time. I still want that Arrival+!

popamode72
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Postby popamode72 » Thu Nov 27, 2014 9:24 am

Excellent job with the analysis there. I hope you have more of these coming up.
Macy's TLs (21k), Lowes (17k), CSP (10k), Sam's Club (10k), Nordstrom (5k), AARP (4.2k), Freedom (3k), Discover (1.5k), Quicksilver (2k), BoA (3k), Barclaycard Arrival (2.5k), Amazon Store (6k), Paypal (4.9k), Sam's Club MC (3.6k), Walmart MC (1.2k)

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Postby CarefulBuilder14 » Thu Nov 27, 2014 2:25 pm

freyj6 wrote:And finally, for extremely high grocery spending (which would probably be pretty unusual to achieve without MR) the old Blue Cash card is another option.


Do you mean MS instead of MR? Or you mean someone spending that much would surely find some high-value use for MR points?

The writeups are great and I'd love to read more.
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
SD: Arrival BrooksBros BCE ED IHG
Letting new accounts cool off since May
Really not sure what I'll add next or when

freyj6
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Postby freyj6 » Thu Nov 27, 2014 7:52 pm

Yes, that's a typo. I meant MS.
Current Strategy

Chase Freedom + Discover IT + Churning

freyj6
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Postby freyj6 » Fri Nov 28, 2014 4:13 am

Now that I think about it. There really aren't that many cards that need this kind of analysis. All no-fee cards are a no-brainer -- get them if it makes sense to put any spending on them. Hotel and airline cards are too specific to the individual, and even cards like AMEX Platinum simply have too many intangibles to come to a general conclusion.

Anyway, while I'm bored and stuffed from Thanksgiving, let's get one more card out of the way.

Chase Sapphire Preferred

CSP is actually a relatively simple card, but it's complicated by its interaction with Freedom and the Ink cards.

Pros:
-Potentially huge sign-up bonus if you can get good value out of UR
-Increases value of other cards like Freedom
-Strong dining card, especially now that US bank cash+ will be dropping 5% on restaurants
-Good travel card for those who get better value out of UR than MR

Cons
-$95 annual fee
-Lower rewards rate than before
-Surprisingly lackluster if you can't get good value out of UR points

Let's start as simply as possible and go from there. First, let's just look at what kind of value you'd have to get out of UR points at particular spending levels with only the CSP card. Like with the other cards reviewed, we'll assume you'd otherwise be getting 2% back on everything with DoubleCash, so credit towards the $95 annual fee only comes from values above 2% back.

If you get the base value of 1.25 cents per point:

Travel/Dining spending needed to cover annual fee: $19,000

At a value of 1.5 cents per point

$9,500 on travel and dining.

At 2.0 cents

$4,750

At 2.5 cents+

Almost nothing, because you'd also be getting 0.5% more back on uncategorized spending.

So basically, if you're getting the base value of 1.25 through Chase's 20% off travel deal, you've got to spend a boatload of money. For huge spenders and frequent travelers this is doable, but way out of reach for your average person. At a value of 1.5 cents, we're inching into more reasonable territory, but still falling outside of most people's spending habits. Once we get into the 2+ range, it's much easier. And remember, CSP's travel category is very broad, so spending on monthly parking, taxis, buses, etc all goes into this.

One thing that makes these amounts slightly harder to reach/justify is that there are other options for high rewards rate on travel/dining. The no-fee Freedom and Discover cards collectively cover two quarters of dining each year at 5%, so if you're wanting to maximize the value you're getting, that means you essentially only have half the year to be using CSP for dining, which doubles the amount you need to spend. Airfare is also covered by PRG, so if the bulk of your annual fee justification on CSP is going to be flights, those with very high spending are likely to do better with PRG's 3x points on airfare. Yes, you can get an extra UR point from booking through Chase, but you'd miss out on airline miles from booking on the airline... so it's a wash.

Whew, this is already getting a little complicated. Basically though, you have to hit 19k/9.5k/4.75k respectively even after adjusting for using others cards when they offer higher rewards. But if you're getting huge value out of UR, this isn't an issue.

Adding in Freedom and Ink Cash

For many people, Freedom and Ink Cash are CSP's saving grace. At a moderate rewards rate of 1.5-2 cents per point, these cards can justify part or all of CSP's annual fee even if you spend absolutely nothing on travel or dining.

Freedom at a rewards rate of 1.25

$12.5 off CSP annual fee per $1000 spent

Freedom at 1.5

$25 off per $1000 spent

Freedom at 2

$50 off per $1000 spent

So essentially what this means is that you can have reduced travel/dining spending on CSP and still justify part or all of the annual fee through its ability to improve the value of points earned on your Freedom card. Spend $2000 on Freedom at a UR value of 2? Your annual fee is covered right there.

The Ink Cash provides a similar benefit. Although most people spend very little at office supply stores unless they're doing manufactured spending (which is out of the scope of these posts), most people do spend a decent amount on internet, cable and phone. Often between $100 and $200 a month, or $1200-2400 a year. Since it's a 5% category, the multiplier is the same as Freedom. So if you value UR points at 1.5 cents and spend $2000, that's $50 towards CSP's annual fee.

Obviously with the integration of these two cards, who should and shouldn't get CSP is a bit more complicated than the above two cards and needs some individual thought, but here's some rough guidelines:

Who Should Get CSP


-Big spenders ($19k+ on travel dining put on CSP)

-People who take advantage of Freedom and Ink Cash categories, eat out and travel some, and can get a value of 1.5 cents or more from UR points

-Most people who can get a value of 2.0 or greater, especially with Freedom and Ink Cash

-Virtually anyone who can get 2.5+ cents out of UR points

Who Shouldn't Get CSP

-Small spenders who don't travel or eat out much

-Most people who can't get 1.5 cents or more out of UR points

-Anyone who doesn't travel

-Anyone who would benefit just as much or more from using Ink Plus to boost the value of Freedom/Ink Cash points instead, since Ink Plus gives retention bonuses and airport lounge passes.

So that's pretty much it. You need to calculate whether your dining/travel spending, in addition to the increased value on your Freedom/Ink Cash spending justifies a $95 fee (assuming you'd otherwise be getting 2% back on everything with the no-fee DoubleCash). If you get sub 1.5 points out of UR, you need to spend a ton and/or really maximize your category spending on the other two cards. The higher you value UR points, the easier it is to hit the spending requirements.

If you want to figure out whether it's worth it for you, here's a workable formula:

(Category spending on Freedom/Ink x 0.05) x (UR Value) - (Category spending x 0.05)

+

(Travel/Dining spending on CSP x 0.01) x (UR value) - 95


If the number you come up with is higher than 0, it's worth having CSP. For example:

(3000 x 0.05) x (1.5) - (3000 x 0.05) = 75

+

(2000 x 0.01) x (1.5) - (95) = -65


Add them together and after all this crazy analysis stuff, CSP saved you a total of $10! Totally worth it right? :p
Cheers!
Current Strategy

Chase Freedom + Discover IT + Churning

Cre
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Postby Cre » Sat Nov 29, 2014 7:40 pm

Stunning analysis. Simply stunning.
Current Cards:
AmEx Platinum Charge: NPSL, $450 AF
AmEx Reserve Credit: $30K limit, $450 AF
Chase Slate Visa Credit: $32K limit, No AF
Future Strategy:
Near Term: Need a good MasterCard for places that won't accept AmEx or Visa
Long Term: Will downsize out of one or both current AmEx cards to reduce AFs



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