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Yesterday I wrote about what Amex’s portfolio of Starwood credit cards will look like going forward. In addition to the current two cards they issue, in August we’ll see the introduction of the new Starwood Preferred Guest American Express Luxury Card, which will have a $450 annual fee.
One of the unique features of this card is that you’ll be able to earn Platinum status by putting spend on the card. In this post I wanted to crunch the numbers on the value of that. Could it make sense to spend $75,000 per year on the Luxury Card to earn Platinum status?
The basics of the new SPG Luxury Card
This SPG Luxury Card will have a $450 annual fee, and will offer the following benefits:
- 6x points at Marriott and Starwood hotels, 3x points at U.S. restaurants and on flights purchased directly from airlines, and 2x points on all other purchases
- An anniversary free night certificate every year that can be redeemed at a property that retails for up to 50,000 points per night
- Complimentary Gold status, and receive Platinum status when you spend $75,000 on the card in a calendar year
- Earn up to a $300 statement credit each year for eligible purchases at Marriott and Starwood hotels
- Starting in 2019, receive 15 elite qualifying nights towards status annually
- A TSA Pre-Check or Global Entry fee credit once every four years
- A Priority Pass Select membership with unlimited visits
- Free premium in-room internet access at Marriott and Starwood hotels
- Free Boingo wifi
You can use the $300 credit at the W Punta de Mita
How Platinum status works on the SPG Luxury Card
Once introduced, this card will offer Platinum status when you spend $75,000 on the card in a calendar year. Platinum status ordinarily requires 50 elite qualifying nights, and spending $75,000 on the card would wipe out that requirement. Keep in mind that this card also offers 15 elite qualifying nights towards status annually, so in reality you’d just need to stay 35 additional nights to earn status if you didn’t want to complete the spend.
If you spend $75,000 on the card your account will be updated to Platinum status, though you won’t actually earn additional elite qualifying nights. In other words, you’d be no closer to Platinum Premier (which requires 75 nights) than before, and you’d also not receive a Choice Benefit, which you get for earning 50 elite qualifying nights in a year (Choice Benefits include five Suite Night Awards).
The real cost of $75,000 of spend on the SPG Luxury Card
Personally I value points in the new program at about 0.8 cents each, and you’re earning two points per dollar spent in non-bonused categories. Using my valuation, your return on spend with this card is equivalent to about 1.6%.
When deciding on how much you’re really “paying” for Platinum status, you have to decide the opportunity cost of that spend.
Personally I think I can achieve an average of about a 2.5% return on other cards:
- The Amex EveryDay® Preferred Credit Card from American Express has a $95 annual fee and offers 1.5x Membership Rewards points per dollar spent when you make at least 30 transactions per billing cycle
- The Chase Freedom Unlimited® has no annual fee and offers 1.5x points, which can be converted into premium Ultimate Rewards points in conjunction with the Chase Sapphire Preferred® Card, Chase Sapphire Reserve® Card, or Ink Business Preferred℠ Credit Card
I value Membership Rewards and Ultimate Rewards points at 1.7 cents each, so that’s like a return of up to 2.55% on everyday, non-bonused spend.
I should also mention The Blue Business℠ Plus Credit Card from American Express, which has no annual fee and offers 2x Membership Rewards points on the first $50,000 spent per year. I won’t use that for opportunity cost purposes though, since it’s a business card, and since you’re capped on earning 2x points on $50,000 of spend per year. However, you can certainly use that for your calculations based on your spend patterns.
So taking Platinum status out of the equation, I’d earn about $1,200 worth of rewards on the SPG Luxury Card, by my valuation. Using another card that offers a return of ~2.5%, I’d potentially earn $1,875 worth of rewards.
That means the opportunity cost of that spend is about $675 per year, which is really what you’re paying for the Platinum status. Everyone can decide for themselves whether or not that makes sense.
I don’t expect everyone’s math to be the same. The above assumes that:
- You value these points at ~0.8 cents each (some may value them more, others may value them less)
- You value the return you can earn on other cards at ~2.5% (some can get a better return than that)
- You have the ability to spend $75,000 in non-bonused categories per calendar year (obviously not everyone can do that)
Should you factor in the annual fee in the cost?
When you calculate the cost of the rewards you earn on a credit card, you also have to factor in the annual fee. However, in this case I think the card can be justified even without factoring in the ability to earn Platinum status. To me, the $450 annual fee is justified based on the following:
- The $300 credit can be earned based on any qualifying spend at Starwood and Marriott hotels, so as long as you charge at least $300 to a Marriott or Starwood folio every year, you should get close to face value from that
- Personally I think the anniversary free night certificate valid at a hotel retailing for up to 50,000 points per night is worth at least $150
I’m using round numbers here, and won’t personally put any value to the complimentary Gold status, the Global Entry fee credit, the Priority Pass membership, and more. I’m just saying that to make the math easy.
The point is that I don’t think you have to allocate any of the annual fee to the ability to earn Platinum status. If you disagree, you can crunch the numbers based on your valuations.
Platinum members in the new program can expect to receive the following benefits:
- A 50% points bonus
- Guaranteed 4PM late check-out, except at resorts (where it’s subject to availability)
- A welcome gift of points, breakfast, or an amenity (breakfast isn’t an option at EDITION, Gaylord, and Ritz-Carlton)
- A room upgrade subject to availability, including suites
- Executive lounge access
Platinum members receive executive lounge access at most brands
The above is intended to give you a framework for deciding whether or not it makes sense to put spend on the SPG Luxury Card in order to earn Platinum status. By my valuation, you’d end up “paying” about $675 for Platinum status using this method, assuming you can easily spend this much on a credit card, and assuming you’d otherwise get a return of ~2.5% on everyday, non-bonused spend.
While I personally don’t plan to take advantage of this, I am happy to see that there’s a reasonably compelling credit card spend option for earning Platinum status in the program.
Anyone plan on achieving Platinum status in the new program through credit card spend?