Chase Ultimate Rewards Gravy Train Ending?

Hey I’m Adam Jusko from Is the Chase Ultimate Rewards gravy train ending? It might be. Before I
talk about that please subscribe to our YouTube channel if you have not already
and if you have already I thank you for doing so. So there’s a rumor out there
that I first saw on the Boarding Area website that says that Chase is
considering ending the exchange formula within the Ultimate Rewards program that
right now lets you transfer points from what is essentially a lower value card
to a higher value card in order to make your points essentially worth more than
they were when you got them. It’s not a sure thing but as far as I’m
concerned I believe this is something that is happening. In fact, I probably
think that this was probably leaked out as a way to sort of get people
used to the idea, to let them kind of start thinking about the fact that this
is something that is coming down the road. Now if you don’t know what I’m
talking about, every single Chase credit card earns points that… any one that has
rewards earns points… within the Ultimate Rewards program. So even if you have a
chase credit card that’s ostensibly a cash back card,
you’re really earning points. If it’s 1.5% cash back you’re
actually getting 1.5 points within the Ultimate Rewards program that
you can then convert to cash. But you also have the option to use those points
for other things within the Ultimate Rewards program. But one of the things
that has happened as the program has gone along… you’ve gotten these
higher value cards, in particular the Chase Sapphire Reserve, that when you
earn your Ultimate Rewards points with that card you can
use those for travel and your points will get a boost. So what is one point
will actually then become… you get a 50% boost and it would then be
worth 1.5 points when it is actually converted to travel. And so that’s a perk for your Chase Sapphire Reserve customers that other cards don’t
give. The Chase Sapphire Preferred gives a little boost, but it’s smaller, it’s
1.25 and then your other cards don’t have this boost. But as the program stands right now, say you have a Chase Freedom Unlimited card. You can actually take your points from that — that don’t give you any boost for the travel — and you could transfer them to the Chase Sapphire Reserve card if you have both
of those cards. And that way you have a card that had a lesser point
value or a sort of a lesser formula in terms of how you can use those points
and you put it into the card that has the higher point value. Now in some ways
you might think “well, why should Chase care? It just means you’re using
this card versus that card. As long as you’re using their credit card,
then they shouldn’t really care. But one of the things that happens within some of these cards is there are bonuses, and there are opportunities to
earn higher points that then, if you take those points and you transfer them to
the Chase Sapphire Reserve, those points are getting boosted even more. For
example, the Chase Freedom Unlimited just recently changed a formula so that you
could earn 3 points per dollar in the first year of having the card. Well, if
you take those 3 points that you earn and then you can transfer them over to
the Chase Sapphire Reserve and use them for travel — well then all of a sudden
those three points are going to be worth 4.5 points within that
program. So that’s a pretty nice boost. Same thing with the Chase Freedom card
that gives you the 5% on certain categories. You go and transfer,
you know, get your 5% and then transfer it over to the Sapphire Reserve — all of a
sudden five points per dollar is going to equal 7.5 points per
dollar. So it’s a great deal and Chase has essentially kind of let
this go, I think partially because maybe not a lot of people were on to
it yet or truly understood what the value was. Maybe a small number of people are using it but there are also PR benefits to it. You get people talking about your card and you get people sort of excited
about Chase in general, talking about it online, about how they’re using
their different points and all that sort of thing. So even if you’re losing some
money on maybe the front end there are some benefits to it that are
maybe a little intangible but they do help Chase. However a lot of times these
things are not sustainable. Once more people know about it and once it starts getting used on a very regular basis, you know, at some
point you’re losing too much money and you’re not going to continue on with it. Just like the Chase Sapphire Reserve when it came out, it used to give a
100,000-point bonus for new card holders. And they got a zillion card
holders, people were very excited, it was great for Chase on the PR side, you know,
people started thinking of the Chase Sapphire Reserve sort of on par
with the American Express Platinum. It was great for them, but at some point it
was such a money loser that they had to cut it back. And now they’re giving fifty thousand points versus that hundred thousand points. So you
have to kind of weigh the two, and I think that Chase is getting to a place
with the Ultimate Rewards program where they are considering changing
how that transfer works because too many people are sort of on to it now. My guess
is that the ability to combine points will stay but what will happen is when
you transfer points from one of those lesser cards to the Chase Sapphire
Reserve or the Preferred card you will essentially get them at a lower value. So
for example say you moved cards from the Freedom… moved points from the Freedom Unlimited… they might only be worth 2/3 of a point when they are
transferred, knowing that those points are gonna get boosted by 50% if
they are used for travel. Same thing with the Preferred that has a 1.25
boost when used for travel — so maybe those would be worth 0.8 or 80% of what the point would normally be when it’s
transferred over. It’s still a nice feature to be able to transfer between
those cards and I would think that Chase would want to keep that
capability, but I think they want to kind of end the gravy train here in terms of
people using their points on one card in ways that maybe Chase
didn’t intend or maybe they, I don’t know, just didn’t think it through. I think this whole scenario, though, is sort of another
example of when you are out there in the credit card market or really
any market when you see a deal that looks like it’s really amazing
and it’s almost too good to be true… well maybe those are the wrong words… sometimes they say “if it’s too good to be
true it probably is.” But if you see a deal from a major company that is giving you a great deal like that, you want to jump on it when you can,
because oftentimes it’s not going to last, right? Because if you think
about it, if a company can’t make a sustainable profit off it, if you can’t
think what possible formula there could be where they could either give you this
or sell you this at whatever rate they’re doing… if you can’t figure
out how they could possibly make a profit, chances are they’re not making a
profit, at least in the long term. So they might be willing to not make a
profit for a while in order to sort of get a program going or get
people excited but over time you have to assume that that’s going to go away. So
if you see something like this, or like how the Chase Sapphire
Reserve was with those 100,000 point bonus, you’ve got to jump on that stuff when you see it. Because there’s a good chance that it will go away. So that’s it.
Thanks for watching. Please go to where we talk about other
credit cards and other personal finance stuff as well. Thanks for watching.

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