The Core Credit Card Concept (CCCC) is an idea I’ve been pondering over the past few weeks. Haven’t heard of it? That’s because it’s a concept I just made up, so you better get ready! I’ve been analyzing the credit cards that I have and the ones that I pay an annual fee for. In particular, the Citi Prestige has been at the forefront of my mind. On July 23rd, the Citi Prestige went through a bad devaluation, but it remains a card that will always stay in my pocket. I have been grandfathered into an annual fee of $350 for the card. The card offers a $250 travel credit every year and I have no problem using that credit. In my mind, that drops the annual fee on this card to $100. But is that enough to make this credit card one of my Core Credit Cards?
Core Credit Card Concept Part 1: Point Transfer Privilege
Both Chase and Citi require you to carry one of their premium credits cards (that have an annual fee) in order to transfer their flexible points currency to other loyalty programs. This means you essentially have to pay a membership fee to take part in their rewards program. The lowest annual fee you can pay to have the privilege to transfer points in both Chase’s Ultimate Rewards (UR) program and Citi’s Thank You (TY) rewards program is $95.
To transfer Citi TY points to airlines and hotel programs, you must carry either the Citi Prestige ($350 or $450 annual fee, before travel discount) or the Citi Premier ($95 annual fee). Citi TY points are probably the least valuable flexible points currency, but I still earn a good hunk of them every year and want the ability to transfer points. The cheaper of these cards is the Premier at $95 a year, but this is only $5 less than what I consider the annual fee on my Prestige.
The question then becomes: are the benefits of the Citi Prestige worth $5 more than the benefits of the Citi Premier? The two cards earn a similar amount of points. The Premier actually earns more because it has a more broad travel category. However, the Prestige gets me Priority Pass Lounge access and the 4th night free on hotel bookings. While I rarely use the 4th night free benefit, I use it at least once a year. To me, the added benefits of the Prestige over the Premier are worth $5.
This brought me to the conclusion that the Citi Prestige is one of my core credit cards, or a credit card that I will hold forever unless the benefits/annual fee changes.
Amex Game Changer
American Express recently introduced a credit card that completely changed the game. That card is the Blue Business Plus. This card earns 2x points on all purchases up to $50,000 in purchases a year. Oh, and it also doesn’t have an annual fee. NO ANNUAL FEE! The average person (including me) will never hit that $50,000 mark. This means I will always be able to at least earn 2x points on every single purchase I make, and that’s just crazy good.
The best part is that this is a full Amex Membership (MR) card, meaning that this card gives you access to transfer points to other loyalty programs. Pretty great for a card with no annual fee. Can you tell how much I like this card yet?
Core Credit Card Concept Part 2: Evaluate All Others Against Your Core
From the first part of this article, I arrived at the conclusion that the Citi Prestige and Amex Blue Business Plus are the two cards in my Core Credit Card Portfolio. For this analysis I’m going to assume that all of the flexible points are worth the same amount. I know this is false, but I am just doing it to keep things simple. My two core credit cards give me the following points per dollar spent:
3x Points on Airfare and Hotels (from the Citi Prestige)
2x Points on everything else (from Dining & Entertainment on Citi Prestige and everything on the Amex Blue Business Plus)
If I am going to add another credit card to my portfolio in order to gain more points (instead of for something like an annual free night with a hotel credit card), then it must be able to earn more than 2x points in at least one category (if I am going to pay an annual fee), and I must spend enough in that given category in a year to make the annual fee worth it.
This means cards like the Amex Premier Rewards Gold (PRG) card are going to get the ax from my wallet. The PRG earns 3x points on airfare and 2x points on groceries and dining. I can already earn at those rates with the credit cards in my Core Credit Card Portfolio, so no matter what, it would not make sense to pay the annual fee for this card.
Having a Core Credit Card Portfolio also makes you value other cards differently.
Let’s look at the Chase Sapphire Reserve (CSR). The card has a $450 annual fee and a $300 annual travel credit. I am going to call the annual fee $150.
The CSR earns 3x points on travel and dining. Since I already earn 2x points in those categories, I now view the CSR as earning 1x more points in travel and dining for an annual fee of $150, instead of viewing it as earning 3x points on travel and dining. Viewing it like this makes the card look much less appealing.
Here’s one last example.
The Amex Platinum card has an annual fee of $550, but offers $200 towards travel and $200 in Uber in a year. If you can use both of those benefits, the annual fee is essentially $150. The card offers the ability to earn 5x points on airfare. Comparing this to my Core Credit Cards, this card’s value proposition turns into whether or not it is worth it to pay $150 for the ability to earn 2x more points on airfare.
If you value Membership Rewards (MR) points at 2 cents a point, then you must earn 7,500 MR points from airfare at a rate of 2x points earned per dollar in order to break even. To earn 7,500 MR points this way, you’d have to spend $3,750 on airfare in a given year for the card to be worth it. That is probably much more than the average person spends on airfare in a year. I do not know how much I will personally spend on airfare in the next year, so I do not yet know if this card would be worth it to add to my credit card portfolio. This analysis completely excluded the other benefits like hotel and car rental status that the Platinum card gives.
In order to add a new credit card to your Core Credit Card Portfolio, you have to put it through this analysis to ensure that its point earning ability will give you value when compared to the annual fee.
Summing It Up
Chase and Citi force your hand in paying an annual fee to have the ability to use their programs to the fullest. Use this to your advantage and develop an initial Core Credit Card Portfolio to compare all other credit cards against. Then slowly add cards to your Core Credit Card Portfolio that give you added value.
In my next post, I’ll combine both parts 1 and 2 of the Core Credit Card Concept in order to pick the Chase credit card that makes the most sense in my wallet. Stay tuned.
Let me know if you have any questions! I know I may have gone way too far in this one.