Will The Chase Freedom Flex Be The End Of Chase Sapphire Cards?
If there is one thing you can say about Chase it is that they do not stand pat, especially in 2020. They have rolled out new spending offers, redemption options and now new products. The Chase Freedom Flex looks to be one of the best cards on the market and is probably THE best no annual fee card out there. It is so good that it has many people questioning, what is the point of carrying a Chase Sapphire Preferred or Reserve card? Why should they pay those annual fees when the earning will be better with the Flex? Did Chase just shoot itself in the foot, will this be the end of Chase Sapphire cards? Will they refresh the Sapphire cards too? Let’s take a look at it together.
Chase Flex Earning Structure
Before we get too deep into it we have to look at what the Chase Freedom Flex will be offering:
- New Freedom Flex cardmembers will receive $200 cash back after spending $500 on purchases in the first three months
- Plus earn 5% cash back on grocery store purchases for the first year (on up to $12,000).
- 5% on Bonus Quarterly Categories – Each quarter they activate, cardmembers will receive 5% cash back on up to $1,500 in combined purchases on bonus categories such as grocery stores, select streaming services and many others.
- 5% on Travel purchased through Chase Ultimate Rewards, including vacation and car rentals.
- 3% on Dining purchases, including take out or eligible delivery services.
- 3% on Drugstore purchases on daily essentials like medicine, toiletries, diapers and other items.
- 1% unlimited cash back on all other purchases.
Why The Flex Will Cannibalize Sapphire Cards
That is a lot of goodness oozing out of the Chase Freedom Flex card. You are hitting a lot of the high points for spending, especially in the first year with the grocery bonus. Throw in the rotating 5% back categories and points will be raining from the sky for cardmembers.
Even the card’s everyday categories are intriguing and sometimes better than the CSP or CSR. Take travel for instance, earning 5% (or 5X) is quite a bit better than the 2X with the Chase Sapphire Preferred or 3X with the Sapphire Reserve. Granted, you do have to book through the Chase portal, which has its downside, but there is value to be had. If the prices in the portal are the same as on the company’s website, that can be a big if, then you will be coming out ahead. The problem with portal bookings is you would not earn loyalty points on hotel stays since they would not be booked direct. For flights, you would get your cake and get to eat it too.
The Freedom Flex would best the CSP and tie the CSR in the dining area at 3% (or 3X). Getting 3% back at drug stores is another great area that is not covered by many cards. It dwarfs the 1X you would earn with either Sapphire card.
From a pure spending point of view I think the Freedom Flex outperforms the Sapphire cards for most people. But there are reasons you may still want to carry one of the Sapphire cards anyway.
Who Should Consider Keeping A Sapphire Card?
If the Freedom Flex is better for spending than the annual fee cards why would you keep one of them then? I mean you could save on the $95 or $550 annual fee by kicking them to the curb. There are a few different reasons:
Transfer Partners
The biggest reason would be access to travel partners. The Freedom cards do not earn transferable points, only Ultimate Rewards earning cards with an annual fee do this. So you would need the Sapphire Preferred or Reserve to make the Freedom Flex more than a cashback card. That is unless you can get an Ink Preferred or have a legacy Ink Plus card. These Ink cards will also unlock transfer partners.
Better Redemption Rates
This somewhat an extension of transfer partners, but not entirely. Carrying a Sapphire card can net you better redemption rates in other areas too. If you often book travel through the Chase portal than your Freedom Flex points would be worth 25% or 50% more with the Sapphire cards. The Chase Sapphire Preferred gets 1.25 cents per point with portal bookings and the Sapphire Reserve gets 1.5 cents per point. If you consider the $95 annual fee for the CSP and the $250 annual fee for the CSR (after the travel credit) you would need to redeem 38,000 and 50,000 points respectively through the portal to offset the annual fee. This would also be the case for the new Pay Yourself Back feature.
More Variety of Travel
Earning 2x more on travel with the Flex card sounds great, but it is limited to portal bookings. That comes with some issues, including the restrictive nature of portals. The Sapphire cards open up other areas of “travel” for you like tolls and subways etc, which for many people are a huge cost. That would not be possible with the Freedom Flex card.
Travel Insurance
The other thing you will want to consider is the travel insurance you get with the premium cards. If you book your flight through the Chase portal you will earn 5% with the Freedom Flex card but you will not have any flight delay insurance that comes with the Sapphire cards. The same thing would happen with a rental car, you would have to pay for insurance on the rental which would cost more than the extra 2x you would be earning. So if you value the travel insurance, and can’t replicate it with another card, then you may want to keep a Sapphire product in your wallet. For tours and stuff that do not require insurance the Flex would still be a great way to book.
Is A Sapphire Lineup Revamp Coming?
It is all speculation at this point but most people think Chase isn’t done yet. Even though the Freedom Flex and the Sapphire products are aimed at different market segments there is currently too much overlap. I could see many people downgrading to the Flex to save on the fee. That makes it seem likely that Chase has something else up its sleeve. I do think the goal is to get young people in the door with the Flex and then have them upgrade into a Sapphire product as they progress in the work force.
I guess they could say that Pay Yourself Back is enough to keep people in the system but that seems unlikely. Chase has been playing around with grocery quite a bit lately. That leads me to believe that something will happen there. Grocery and gas are most people’s largest areas of spend and nothing in the Freedom or Sapphire lineups has those categories on a permanent basis. Could adding a 2x and 3x gas or grocery bonus on the CSP and CSR be enough? It just might. I would expect something along those lines in the near future or expect to see Sapphire retention numbers dip over at Chase.
Final Thoughts
I think holding one of the Sapphire cards will still make a lot of sense for the travelers out there. The more vast travel category, not being stuck to portal bookings and travel insurance will more than make up for the annual fee for many.
But for middle America, or the average consumer, I don’t think they will see the value in paying the annual fee. Most of them will simply use the Freedom Flex as a cash back card. If Chase wants to build their ecosystem, and get people brand loyal, then they will want to have cardholders carrying multiple Chase cards and capture all of their spend. Unless they add a gas or grocery bonus (hopefully both) to the Sapphire products that will never happen. That leads me to believe it just might. Otherwise the Freedom Flex may be the end of Chase Sapphire cards for a lot of people out there.
If you are planning on transitioning into the Freedom Flex card from a Sapphire card you will want to product change to the Freedom card now, before September 14th.
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My CSR is only $450 this coming statement.
Awesome!
I’m at 4/24 with CSP and CFU. I hope they improve the CSP. I looked at other Chase cards but decided that I should get another no annual fee card to keep on my credit report long term. Still, I wasnt gonna get the Freedom Card after I closed on a house next spring. Maybe I should get the Freedom Card now and score the bonus then apply for Freedom Flex next spring. I might need the two 5% cards in the future.
That is what I would do personally. Get the Freedom now before it goes away and then grab the Flex down the road.
No doubt, the “Flex” cards makes the Freedom product much more attractive both for people who only have one card and for those who have multiple cards that they use strategically to optimize points earning, But, I don’t see the Freedom Flex replacing the Sapphire cards for people who are moderate to serious travelers, unless as you mentioned, they also hold a premium Ink card, which provides many similar benefits to the Sapphire cards.
Beyond what you discussed (limited nature of travel through the UR portal, lack of ability to transfer points to partners without a premium card, lack of travel protection, and lower redemption rate if redeeming points through the portal for travel), I think it is worth having one premium UR earning card because of:
– Foreign transaction fees: Freedom products charge 3% transaction fees, which means I would not use a Freedom card at all outside the US. For me, this would significantly limit the usefulness of the dining category bonus too.
– Major (IMO) drawbacks about booking travel through the UR portal including: 1) booking through a third party adds another layer when dealing with cancellations and changes, which I think is a bigger issue with COVID than in normal times, 2) hotels booked through portals generally do not provide loyalty program members with elite benefits and points earning, 3) prices for hotels booked through the portal often are higher and/or do not allow use of special rates, 4) a lot of hotels are not even available for booking through portals [Note: I have used the TYP portal more than UR portal, so that drives a lot of my opinion].
Good points JN – some things that everyone has to consider for sure if they are looking to dump the Sapphire cards. I think the decision does get sticky if you have a Ink Preferred/Plus. In that scenario, unless they add something, I could see a lot of people closing the Sapphire card. If they don’t have one, and they travel, I do think the cards will likely be worth keeping.
A lot of the CSR cardholders are mainstream though and I do wonder what they will do.
@Mark, I think if Chase wanted to do something really interesting with the Sapphire line they should add grocery and insurance and/or utilities. Gas is a large expense for many, but with the pandemic most people are spending a lot less. Also, with the transition to staying home people are running TVs, AC, and cooking more, which is leading to higher utility bills. I also think insurance is easily as high a gas for many people. If you spend $250 on gas per month that’s $3000/year. If you own cars, homes, boats, etc, you easily spend that much on insurance.
That would be a good one too. Very few cards offer that as a bonus area and there is no way to game it so they would have less exposure vs other spend areas.
I’m surprised no bloggers have considered my fear which is Chase ends the ability to move points from the Freedom Cards to a Sapphire Card. This would make the Freedom Cards true cash back cards as most people outside the hobby already consider them to be. I lose most people when I start explaining how to pair Freedom Cards with a Sapphire card to redeem for travel at a higher rate or transfer to a travel partner. This change would make the Freedom Cards a little less rewarding for those of us enthusiasts but likely wouldn’t impact a majority of their cardholders who don’t understand the benefit of pairing Freedom Cards with a Sapphire Card.
I mentioned that in our recent podcast episode and it is something I have a little bit of fear about for sure. But I think that would have leaked by now and to be honest I think people that transfer points is a very small subset of Freedom card holders. A vast majority of them simply cash them out.
Does Freedom Flex offer primary rental car insurance?
We won’t know for sure until the card is officially launched but I wouldn’t count on it.
No. The Freedom cards, including the Flex, offers no travel protection except for secondary car rental and trip cancellation/interruption with $1,500 per person and $6,000 per trip limits. In contrast, the Sapphire Reserve offers 6 hour trip delay, baggage delay, baggage loss, medical evacuation, emergency medical, primary rental car, 1million life insurance and trip cancellation/interruption ($10,000 per person and $20,000 per trip) coverage. The Freedom cards also have a 3% foreign transaction fee.
Thank you. It looks like that CSP (and CSR) has a unique merit over Freedom family. No Fx for foreign travel, primary rental car insurance.