If You’re Going To Spend $150 Per Year “Out Of Pocket” On A Credit Card…

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This week we saw the introduction of the new Barclays Arrival® Premier World Elite Mastercard®. The card has a $150 annual fee, and offers 2x miles per dollar spent with no caps, in addition to spend bonuses:

  • Spend $15,000 on purchases in a cardmember year, earn 15,000 bonus miles
  • Spend an additional $10,000 on purchases in a cardmember year, earn 10,000 bonus miles

Given that each mile can be redeemed for a one cent statement credit towards travel, the card offers a return of up to three cents per dollar towards travel on the first $25,000 of spend each cardmember year, and a return of two cents per dollar towards travel on any remaining spend. Of course when considering that value you’d want to subtract the $150 annual fee from the rewards you’re earning.

It’s not a bad card, but I do feel like they failed to make a splash in the market, especially given the card’s lack of a sign-up bonus.

Since the card has a $150 annual fee, I wanted to share what I consider to be the best alternative that will cost you roughly the same out of pocket.

The Chase Sapphire Reserve’s “real” $150 cost

The  Chase Sapphire Reserve® Card has quickly become one of the most popular travel rewards credit cards in the US, despite having been introduced in the US market less than two years ago. The card has a $450 annual fee, and offers the following amazing benefits:

  • A sign-up bonus of 50,000 Ultimate Rewards points after spending $4,000 within three months
  • A $300 annual travel credit
  • Triple points on dining and travel
  • A Priority Pass membership with unlimited guesting privileges
  • Fantastic travel and car rental protection
  • The ability to redeem points for 1.5 cents each towards travel purchases
  • A Global Entry fee credit every four years
  • The ability to add authorized users for $75 each

The way I view it, the card’s real annual out of pocket is $150 (you pay $450 upfront, but get reimbursed $300 over the course of the year). That’s because you get a $300 travel credit, and that’s so easy to use. You don’t need to register to redeem it, but rather any travel purchase is automatically reimbursed for anything coded as travel, from flights to hotels to parking to Uber to trains. Basically anyone who has the Chase Sapphire Reserve should be maxing this out, because if you don’t spend at least $300 per year on travel, this probably isn’t the card for you.

What do you get for that $150?

This is where the Chase Sapphire Reserve really shines. The card offers a big 50,000 point sign-up bonus, 3x points on dining and travel, and a Priority Pass membership with unlimited visits and guesting privileges, among other things.

The points earned on this card are 50% more valuable than the points earned on the Barclays Arrival Premier. That’s because each point can be redeemed for 1.5 cents towards the cost of a travel purchase.

Supercharging your Sapphire Reserve points earning

In addition to the excellent bonus categories on the Chase Sapphire Reserve, the no annual fee Chase Freedom Unlimited® can increase your points earning even more. In my opinion it’s the best credit card duo out there.

If you have that card in conjunction with the Reserve, then those points can be converted into Ultimate Rewards points that can be redeemed for 1.5 cents each towards travel, or be transferred to a travel partner.

Putting it all together

If you have both the  Chase Sapphire Reserve® Card and the Chase Freedom Unlimited® you’d pay a total of $450 in annual fees, though you’d receive a total of a $300 travel credit, meaning the real cost is about $150 per year for most. For that you earn:

  • 3x points on dining and travel (with the Reserve)
  • 1.5x points on everything else (with the Freedom Unlimited)

Those points can be redeemed for 1.5 cents each, so that means you’re earning 2.25% towards travel on everyday purchases, and 4.5% towards travel on travel and dining purchases.

Then you get all kinds of awesome benefits thrown in, like a Priority Pass membership, great travel protection, and much more. You can also convert points at a 1:1 ratio to nearly a dozen travel partners, while Barclays points convert at a 1.4:1 ratio at best.

If you’re willing to get creative and apply for both of these cards, then this combination is almost certainly better than what you’d get with the Barclays Premier.

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Comments

  1. Thank you for being so clear about this Lucky.

    For ongoing spending the CSR/CFU or Amex PRG/Blue Business combos are clearly better than the Barclays Premier for almost everyone.

    This card is not a horrible effort, but its just not good enough.

  2. Really good article Lucky.

    This is the only card that I truly consider to be $150 because the travel credit is very broad and easy to use. I noticed that even tolls and Uber eats is working so it is very very easy to use.

    I actually have the citi prestige, amex platinum and ritz credit card. Using AA gift cards I end up paying around $100 prestige $250 for platinum and $95 for ritz.

  3. You folks who continue to gag over cards with annual fees that issue travel credits look like you need a lesson in basic math.
    Spend out of pocket – annual credit card fee of = $450
    Spend on credit card $300 worth of charges = $300
    Total spend=$750
    Card gives back $300 credit = ($300)
    Total out of pocket remains at $450. Real cost of carrying the card is $450

    A real benefit with annual fee cards would be something you pay out of pocket for in the first place. $0. Like Priority Pass membership.
    My Credit Union Visa card has $0 annual fee, and issues a $100 credit for Global Entry every 4 or 5 years. $0 out of my pocket. Now that’s a real benefit.

  4. @Elias hey if you don’t mind me asking you was it easy to get the citi prestige at $350? i’m trying to find a way to get it if it’s for $350 annual fees. I also missed out on Ritz at $395 a year.

    i think i’m just gonna stick with Sapphire Reserve since it’s so easy to use the travel credit it also counts as parking too.

  5. If you intentionally set out to design a more uninspiring card, I doubt you could surpass the mediocrity of the new Barclays card. Imagine trying to convince your friends to sign up for this thing.

  6. I agree with all of you folks (especially Tommy…hahaha). To even think of this card (am talking to you Barclays) is being totally asinine and clueless. What the f*ck are you people thinking about? This, by far, other than credit cards for people with bad credit is the worst offering I have seen in my lifetime (and that’s 61 years!). Why do banks come up with this crap is totally beyond me. It feels as if they don’t want to even compete with AMEX, Chase and etc….am sure some people would sign up for this piece of rubbish but I would say 9 out of 10 won’t pull the trigger on this. Maybe, just maybe, Barclays has some master plan that only the higher ups have figured out. These are probably the same people hired by Barclays from AA, Delta, United and Spirit. Oy vey!

  7. Get the FREE Discover it Miles card which gives 1.5 points per dollar spent, and the entire balance is doubled for the first year (also 3 points per dollar spent).

  8. Barclay Arrival Premier ($150) and Citi Prestige ($350/$450); both are currently without any sign up bonus at all. I really wonder about anyone who applies for either of these, considering the plethora of cards currently available with 50K points, and 60K to 70K miles, bonuses.

    I have to guess that Barclays and Citi somehow find quite a few chumps to apply for them, or they wouldn’t bother advertising them. But I just have no clue as to where they find these people.

  9. CSR doesn’t have “fantastic” travel protection, though it does have primary car insurance. It won’t pay for your plane ticket to get home in an emergency, for example, though citibank will.

  10. Lucky you should do a table wise study of all the features off the premium cards and tell us which one wins out over the other. So if you want to push CSR tell is how it is the best and what is the difference between primary and secondary and where things like this will be useful. What is trip insurance or extended warranty and which is best. A lot of these little known features are where the value is hidden. The sign I bonus is a beaten horse. When you do your monthly card shill you should include this updated table as well.

    A lot of this knowledge (including actual usage experience is in the comments) Which you need to leverage.

  11. @angel. Your logic only holds if you weren’t going to spend the money anyway. If I’m going to spend $300 on travel anyway and my credit card refunds me that $300, then I’ve saved $300 and I can realistically reduce the out-of-pocket on the card. If, as lucky says, you aren’t going to spend $300 on travel anyway you shouldn’t get the card.

  12. @AD.
    My comment and the math is in relation to the “$150 real cost” spin.
    $750 out of pocket ($450 annual fee and $300 in qualified travel charges to the card) less $300 credit by the card issuer = net $450 cost to the cardholder. Not $150.
    $450 out of pocket for the annual fee with cardholder not using up a dime of the $300 credit = $450 cost to the cardholder. The $450 cost to the cardholder is the same. Simple math.

  13. @sunny actually I had citi gold because I opened an account to get the 50k miles back in the days and never closed it. The account for some reason is still open even though it has $0 in it. I went to my local citi gold banker and asked for the citi prestige application and filled it. She faxed it and I was approved. It is, in my case, my most valuable card. I get about $1000-2000 each year on 4th night free credits. Also the travel insurance is the best and citi price rewind is the best.

  14. It’s clear to me that they are using different perspectives in this matter: increments vs total. And depending on your question, you get a particular answer.

    If I were regularly spending $300 on travel related expenses without the CSR, my total cash out is $300 regardless.

    With the CSR, I would spend $300 + ($450 – $300 credit) or $450. That’s $150 more than the No CSR scenario.

    Angel says we focus on the $450 total amount because that is still the actual out of pocket cost (This $450 is also the sum of the $300 we spend anyway on travel + $150 net CSR cost). Valid point, although technically speaking the $450 is not the cost of carrying the card, since $300 of the $450 is spent irrespective of the type of funding used. AD says we focus on the $150 net cost increase. Sounds valid if you think about it as a cost of having the card assuming you spend $300 on travel anyway every year.

    If your question is: how much is my cash out with the CSR, Angel is right. It’s the $300 you spend anyway (but now with you CSR) + $150 net CSR cost. If your question is: how much more will I spend having a CSR, it’s $150.

  15. @Angel – If you aren’t spending $300 a year on travel, what on Earth are you doing on this site at all?

  16. @Angel.

    If you were gonna spend $1000 a year on vacations or tolls or whatever and end up

    Paying $700 cash ( get $300 from credits)

    And you pay $450 anual fee,

    Then your out of pocket cost is $1,150.

    $1000 for the travel you were gonna spend without the card and $150 for the card….

  17. @Angel sez: “You folks who continue to gag over cards with annual fees that issue travel credits look like you need a lesson in basic math.
    Spend out of pocket – annual credit card fee of = $450
    Spend on credit card $300 worth of charges = $300
    Total spend=$750
    …etc..”

    You are the one gagging here and need a lesson in basic math.

    Here’s the easy way to look at it.

    Let’s say your CSR credit line is $10K.

    Your spend out of pocket for the annual fee (AF) = $450.

    Now, monitor your CSR $10K credit line as you start spending, for simplicity, only on travel. You will notice that your credit line stays at $10K as you continue spending, up to $300. It is like you did not spend any money at all. Therefore, because you would have been out of $300 had it not been for the CSR travel credit, you need to subtract $300 from the $450 AF, which is then effectively just $150.

    Another way to look at it is that the CSR $300 travel credit is like a “buy one, get one free” (BOGO) deal. You spend, say, $10 on a taxi cab ride. When the charge posts, it is immediately negated and the $10 reappear in your account. That scenario is the same as if you’d taken a $10 taxi ride and got back $20 for it: $10 paid for the taxi ride [someone had to!] and $10 were returned to your CSR account. The effective “value” of the CSR $300 travel credit is, therefore, 2x or $600.

    So, in your example, the total spend is $750, but the value of the CSR credit is 2x, so that

    $750 – (2*$300) = $150.

    Same thing.

    What you fail to take into account, as @AD correctly pointed out, is that “Your logic only holds if you weren’t going to spend the money anyway.” However, because you were going to spend the $300, ANYWAY, you would simply have been $300 poorer WITHOUT the CSR $300 credit, whereas WITH the credit, it’s like you had $300 extra in your account that offset your NECESSARY expenses up to that amount. In this case, the $300 travel credit does offset the CSR $450 AF…

  18. Angel – I don’t think you understand what a sunk cost is. I spend $10k a year on travel for personal and a bit more than that for business. That $300 credit is a straight up offset for money I was going to spend anyway, many times over, and I imagine that is true of nearly everyone who gets the card and keeps it past the signup bonus.

    Here is a simple example.

    Let’s say your annual take home of taxes is $100,000.
    You are going to take the family to the Europe for a cost of $10,000 for 10 days.
    Your out of pocket take home after the Europe trip is $90,000, correct?

    Ok, now same scenario except you get a Chase Sapphire Reserve card.
    Your annual take home net of taxes is still $100,000.
    You pay Chase $450 for the CSR.
    You bill $10,000 worth for the Europe trip, however, due to the CSR $300 credit, you only have to pay Chase $9,700 when the bill shows up.
    Your total take home after the CSR cost and the Europe trip is $89,850, or $150 less than you would have without the card.

    In reality, if you were going to take a $10k trip, you’d probably pay $400-$500 for insurance, which you wouldn’t need with the CSR card so you should be net positive right there, excluding any other benefits like Priority Pass, 3x points, etc.

  19. @Elias that’s nice. that’s my main reason to get the citi prestige but only if i can get it for $350 a year. right now i have sapphire reserve and amex prg so only if i could get citi prestige but with a signup bonus that would be really good. i know there’s a way to get it for $350 without being citi gold.

  20. @cupcake – it’s obvious from angel’s post with the “real” comment that s/he really believes his/her out of pocket cost is $450 even if s/he will spend the money on travel, which is absurd.
    If you really want to screw with Angel’s head, ask Angel how she/he’d value the card with no $300 credit annual vs how they do now.

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