Lesson 3: 

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:

1. Payment processor (Visa, Mastercard, American Express & Discover)

2. Issuing bank (Chase, Capital One, Citibank, etc)

3. (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

  • Dining concierge - Great for difficult reservations & foreign countries

  • Experiences - Chef-tasting menus and other pop-ups

  • Golf course access & discounts - Visa via Troon & Mastercard via PGA

  • Hotel discounts - I haven’t seen worthwhile deals here

  • Rental car discounts - And included damage insurance

• 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.

🍬 Sweet Spotlight: Fifth Freedom Flights

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.

💳 Credit Card Review | Chase Sapphire Cards

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.

Chase Sapphire Reserve®

• 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)*

Chase Sapphire Preferred®

• 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).

Learn more

🎓 Drop some knowledge

You did it, three days of content and you likely have a better understanding of credit card rewards programs than most people. Let’s recap a few key learnings:

1. Points are more valuable than you may think - If you’re spending a few grand you will likely shop around for value, the same principles should be applied to spending points.

2. Banks and card companies each have their own rules - You cannot simply open card after card to rack up intro bonuses. Instead you should be discerning with your selection of cards and aim to open cards that you’ll receive long term value from.

3. Cards come with plenty of fringe benefits - It’s easy to scoff at $500+ annual fees, but if you understand and utilize the perks, it may prove to be a fantastic deal.