The anatomy of a rewards card & fringe benefits
Birth of the charge card
It’s 1949 on West 33rd St in NYC. Frank McNamara just finished his meal and realizes that he doesn’t have any cash on him. After his wife brings him cash for his bill, he sets off to spare that embarrassment on anyone else.
Less than a year later McNamera launched the Diners Club Card. Despite its cardboard construction and limited acceptance in the early days, it was a novel idea and blazed a trail for the first official credit card, the Bankamericard.
Visa & MasterCharge
Bank of America launched the Bankamericard in 1958 and went on to become Visa. As other banks took note of Visa's success they joined together to create “MasterCharge” the predecessor to today’s Mastercard.
Visa, Mastercard, American Express & Discover still dominate the credit/charge card industry. In today’s issue we’re dissecting the anatomy of a rewards card and all the fringe benefits they come equipped with.
Prior Lesson Recap
In Lesson 2 we covered the rules of the game. Key takeaways being:
Points should add value to your life, don’t get carried away and overspend
Ensuring good privacy and security hygiene will get you started on the right foot
Your past 12 months of spend will help you calculate a baseline spend
Issuing banks have various rules to keep in mind, like Chase’s 5/24 rule
For most of us 1-2 new cards per year is more than enough for an epic annual trip
Lesson 3: The Anatomy of a Rewards Card
A rewards card is a coordinated effort between various companies, but it all starts with 1-3 of which that play the lead roles:
Payment processor (Visa, Mastercard, American Express & Discover)
Issuing bank (Chase, Capital One, Citibank, etc)
(Optional) Co-branded partner (Delta, United, IHG, Marriott, etc)
The AMEX Platinum card is an example of one company doing most of the heavy lifting on their own, while the World of Hyatt card entails Visa, Chase & Hyatt working together. While most of us won’t notice a difference in service, I mention it because just like Chase or Capital One offering premium card benefits, Visa & Mastercard each have their own respective service tiers that come with benefits.
Visa & Mastercard Service Levels
Visa offers Traditional, Signature & Infinite
Mastercard offers Standard, World & World Elite
While American Express and Discover issue their own cards, the levels above are helpful as another framework for quickly sorting through potential cards. Generally speaking, any card with an annual fee of $300 or higher should qualify as a top tier card, the exception being co-branded cards.
Airlines like American, Delta, and United have co-branded cards that may not be top tier, but have high annual fees because they include lounge access to that specific airline. In my opinion those cards are not worth the cost since they lock you into a specific airline and many of the lounges they offer are outdated in comparison with AMEX Centurion or Capital One lounges.
Going back to Visa and Mastercard for a moment, I was perusing their rewards sites linked below and was surprised to see a number of unexpected benefits that each program offers. Here are a few examples:
Shared Benefits
Visa Infinite
Skillshare, online courses 3 month membership
Shipt, local grocery delivery (useful for Target shoppers)
Sonoma Wine, BOGO tastings and $1 bottle shipping
Mastercard World Elite
DoorDash, 3 months of DashPass
Lyft, take 3 rides in a month and get a $5 credit
Shoprunner, free shipping at 100+ stores
While these perks aren’t mindblowing, they may provide reason to diversify your card holdings. Let’s explore some additional hidden card benefits across all premium cards.
Fifth freedom flights offer opportunities to experience fantastic business and first class products at a significant discount in price (and points). While the name is odd, it stems from commercial aviation agreements between countries and specifically references a flight that is traveling between two countries, neither of which is its home base.
For example when Singapore Airlines travels between New York and Frankfurt, Germany. While that plane may continue to Singapore, the stop in Frankfurt allows for us to experience Singapore without continuing on the full journey to Singapore. If the plane was only stopping to refuel and didn’t deplane, it wouldn’t be a fifth freedom route.
A few sample routes:
Emirates flies from New York to Milan and Athens (both routes continue to Dubai)
Ethiopian Airlines flies from New York and Newark to Lomé (both routes continue to Addis Ababa)
Singapore Airlines flies from Houston to Manchester, Los Angeles to Tokyo, and New York to Frankfurt (all routes continue to Singapore)
Starting June 2023, Qantas will fly from New York to Auckland (the route will continue to Sydney)
Many of these routes have sweet spots available, and I’m personally a big fan of the Emirates NY to Milan and Athens routes as my preferred method of getting to Europe.
To wrap our mini-series I wanted to end where it all began for me, and that’s with the Chase Sapphire Reserve® (CSR) card. Since its launch back in August 2016, it has been the crown jewel in the Chase portfolio of cards. Let’s do a comparison of the Reserve with the Chase Sapphire Preferred® card, to see if either is right for you.
https://milevalue.com/creditcards/chase-sapphire-reserve/?aff=awa
BENEFIT (my estimate value of the benefit) ( = requires enrollment)*
Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $900 toward travel when you redeem through Chase Ultimate Rewards®
$300 Travel statement credit ($300)
Priority Pass Select lounge access ($100)*
$100 for Global Entry, TSA Precheck or NEXUS every 4 years ($25)*
$10 GoPuff credit (delivered monthly) ($120)
DoorDash Dash Pass ($100)*
Instacart+ 12 month membership ($120)*
https://milevalue.com/creditcards/chase-sapphire-preferred/?aff=awa
BENEFIT (my estimate value of the benefit) ( = requires enrollment)*
Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 when you redeem through Chase Ultimate Rewards®.
$50 Hotel statement credit (must book your hotel through the Chase portal)
$10 GoPuff credit (delivered monthly) ($120)
DoorDash Dash Pass ($100)*
Instacart+ 6 month membership ($60)*
Before learning more, remember that in yesterday’s Rules of the Game, Chase only allows you to hold either the Reserve or the Preferred at any given moment. Additionally, you only qualify for either Chase Sapphire welcome bonus once every 48 months. Lastly, Chase has a strict 5/24 rule, meaning you can only open a Chase personal card if you haven’t opened 5+ new cards in the past 24 months (note that if you’re added as an authorized user that will likely count towards this total).