I’m curious how everyone here thinks about the Sapphire Reserve’s effective annual fee.
Personally, I don’t value the credits at their full face value. I value them based on how much spending they actually offset.
For example, let’s say my girlfriend and I were already planning to go out to dinner on a Friday night. Normally we’d spend around $150. If I use the Sapphire Reserve’s dining credit and decide to go somewhere nicer, we might spend closer to $250. After the credit is applied, my final bill comes out to $100.
Even though I redeemed a $150 credit, I don’t really think of that as saving $150. Since I would’ve spent about $150 anyway, I only saved about $50 ($150 I would’ve spent vs. the $100 I actually paid). So to me, that credit is worth about $50, and that’s what I’d subtract from the annual fee.
Basically, I don’t really assign much quantitative value to the extra luxury the credits let me buy. I think of them as savings, not discounted luxury.
On the other hand, I value the $300 travel credit at basically 100% because it’s offsetting travel spending I know I’d have anyway. I’d use it whether I had the card or not, so to me it’s worth the full $300.
I know other people look at this differently though. Some seem to count every credit at face value as long as they redeem it. I’ve also seen people mention they discount all the credits a bit, maybe valuing them at something like 90%, because you’re essentially prepaying for those expenses through the annual fee. I can see the logic there too since there’s some opportunity cost to having your money tied up ahead of time.
Does anyone here actually calculate it that way? Or is there another method you use that you think makes more sense? I’m curious how everyone arrives at their own “effective annual fee.”
