Cap One to take on Sapphire Reserve?

Capital One Reserve

In a move that should surprise absolutely no one, it appears that Capital One is preparing to release an ultra-premium travel rewards card next year to take on Chase’s Sapphire Reserve.  Caroline Lupini shares this info on Travel with Grant’s blog. Caroline says that the card should be released in the second quarter of 2020, and that she has it on “good authority” from a source that the card will have the following features:

  • 10X points per dollar on hotels booked through the Capital One portal
  • 5X points per dollar on airfare booked through the Capital One portal
  • 4X points per dollar at restaurants
  • 1X points per dollar on all other purchases
  • Additional point bonuses at certain spend thresholds
  • $300 travel credit
  • $495 annual fee

I think it’s safe to assume that the card will also include additional perks not listed here such as travel protections and whatnot.  I’d be very surprised if they don’t throw in some form of Priority Pass membership too as that seems to be the bare minimum required to compete in the ultra-premium travel market.

“Miles” same as Venture Rewards?

While Caroline’s post is silent on this topic, I think it is fair to assume that this new card will earn Capital One “miles”.  That is, it will earn points that they call “miles” and those points are worth 1 cent each towards travel.  Also, those points will be transferable to airline miles at a rate of 1000 to 750 (2 to 1.5) or 1000 to 500 (2 to 1) depending upon which airline miles you want.  See Capital One Transfer Partners.

The rest of this post assumes that this assumption is true.

My take on the card’s bonus earnings…

10X for hotels, 5X for airfare, and 4X for restaurants are eye catching numbers, but I’m not as impressed as you might think.  Let’s look at each:

Hotels 10X:  Capital One already offers 10X rewards for hotels booked through a dedicated site for their Venture One and Venture Rewards cards.  That’s a decent way to earn rewards on hotel stay bookings if you want to keep things simple, but there are drawbacks: you can’t then earn rewards by clicking through a portal; you can’t save money by buying hotel or hotels.com gift cards at a discount; you can’t earn hotel loyalty points; etc.

5X airfare: Assuming that airfare prices are the same when booked through Capital One as elsewhere, this is a solid rebate for airfare spend.

4X restaurants: This is a good rebate for restaurant spend.

1X everywhere else:  This is sad.  I hope that Caroline got this one wrong because to me it kills this card.  Yes, it’s true that competing cards earn only 1X for non-bonus spend, but I feel like Capital One’s ultra-premium card needs to earn at least as much on non-bonus spend as their $95 Venture Rewards card (which earns 2X everywhere).

How does it stack up vs the Sapphire Reserve?

We don’t yet know about the Capital One card’s benefits, so we can’t evaluate those, but we can compare the card’s annual fee, earning structure, and rewards.

Annual Fee

  • Capital One: $495 – $300 travel credit = net $195
  • Chase Sapphire Reserve: $450 – $300 travel credit = net $150

Advantage: Chase.  Note though that Chase charges $75 per authorized user.  If Capital One allows for free authorized users, the combined annual fee for a couple would be less than with Chase.

Rewards

With Capital One, points are worth 1 cent each towards travel.  Alternatively, you can transfer points to airline miles usually at a ratio of 2 to 1.5.

With the Chase Sapphire Reserve, meanwhile, points are worth 1.5 cents each towards travel booked through Chase.  And you can transfer points 1 to 1 to airline and hotel partners.

Given the above award rates, we can then compare rewards head to head (sort of) by comparing the earning rate when the intent is to use points to buy travel; and when the intent is to transfer to miles…

Purpose: Earn points then use points to pay for travel

Capital One Chase
Hotel Spend 10% 4.5% (3X times 1.5)
Airfare Spend 5% 4.5%
Other Travel 1% 4.5%
Restaurants 4% 4.5%
All Other 1% 1.5% (1X times 1.5)

As you can see above, if your goal is to use points to pay for travel, Capital One’s rumored card is way more rewarding for hotel spend, slightly more rewarding for airfare spend, slightly less rewarding for restaurant spend, and much less rewarding elsewhere.

What if you prefer to transfer points to airline miles?…

Purpose: Earn points then transfer to airline miles (or hotel points with Chase)

Capital One Chase
Hotel Spend 7.5X 3X
Airfare Spend 3.75X 3X
Other Travel 0.75X 3X
Restaurants 3X 3X
All Other 0.75X 1X

Once again, the rumored Capital One card is much more rewarding for hotel spend (as long as you book hotels through their designated site), and slightly more rewarding for airfare.  Restaurant rewards are equal with either card (4X Capital One points = 3X airline miles).

For travel other than hotels or airfare (or purchases outside of Capital One’s channels), Chase blows away the Capital One card with 3X miles per dollar rewards vs. Capital One’s 0.75 airline miles per dollar.

Conclusion

If Caroline’s details about the rumored Capital One card are correct, then I predict it will be a dud.  Sure, if they offer a big enough signup bonus people will go for it.  But if you examine the rewards compared to the top competition, it barely stacks up.  The only place where the Capital One card would be significantly more rewarding is with hotels booked through a designated website.

Capital One can save the card with a few minor adjustments.  I believe that this card can be a serious contender if they make two changes to the reward structure (and keep the rest the same):

  1. Offer 4X rewards for travel regardless of where the travel is booked.  This will give cardholders a 4% rebate on travel when points are used to purchase travel, and 3X miles per dollar if points are transferred to airline programs.
  2. Offer 2X rewards for “everywhere else”.  This will give cardholders a 2% rebate when points are used to purchase travel, and 1.5X miles per dollar if points are transferred to airline programs.

If Capital One changes the reward structure as suggested, I believe that it would be a serious threat to the Sapphire Reserve card, especially if they also throw in similar or better benefits.  One big advantage of Capital One “miles” vs Chase Ultimate Rewards points is that Capital One “miles” can be used at full value to reimburse any travel paid for with the card.  With Chase, you have to book travel through their Ultimate Rewards portal in order to get full value.

Capital One has plenty of time to fix this.  In fact, it wouldn’t surprise me at all if they purposely leaked information in order to get feedback while there was still time to make changes.  So, here you go Capital One.  My feedback, in a nutshell, is to offer the following rewards along with free authorized users in order to take on Chase:

  • 10X points per dollar on hotels booked through the Capital One portal
  • 5X points per dollar on airfare booked through the Capital One portal
  • 4X points per dollar for all other travel
  • 4X points per dollar at restaurants
  • 1X 2X points per dollar on all other purchases
  • Additional point bonuses at certain spend thresholds
  • $300 travel credit
  • $495 annual fee (plus free authorized users)

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

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Rob
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Rob

For me to be interested in this card it would have to go even further than your suggestions to compete with Chase. It isn’t a small thing to me that Chase invests hundreds of millions in security and tech, while Cap One just had a major breach. I personally also wouldn’t compare their return on Hotel spend as 10% to 4.5% in Cap One’s favor. Booking through Cap One’s portal means you are foregoing loyalty points. So if you are a Marriott Platinum, you would be passing on 15 Marriott points per dollar by booking through Cap One. At 0.7 cents per Marriott point, that’s 10.5% back, plus 4.5% in Chase points using the CSR. So for that example the return on spend comparison is really 10% on Cap One vs. 15% using Chase Sapphire Reserve. Even a non-elite Marriott hotel stay would earn 10x points or 7% just from loyalty, still making the CSR superior.

Mike
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Mike

How about some special benefits at Capital One cafes? They don’t have many, however they sure are nice

CaveDweller
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CaveDweller

Mike
I agree all that money and where’s the free beef ?
CHEERs

Nick Reyes
Editor

One interesting thing to note here is that, as we previously reported back in March, the Hotels.com Venture page lists the end date on that partnership as January 31, 2020. Capital One hasn’t made an official announcement, but one might connect dots here and take that along with this to mean that they are getting rid of the Hotels.com partnership in favor of their own portal. That is somewhat of a devaluation in itself as you can currently earn 10x with the Venture through their Hotels.com site plus earn the equivalent of 10% back in Welcome Rewards. If they are going to end that double dip, I’d certainly hope that they take Greg’s advice here as booking through their portal won’t be interesting when one could alternatively buy Hotels.com gift cards at 15% off of face value and stack with 10% back via Welcome Rewards.

YoniPDX
Guest
YoniPDX

I brought that point up on DOC, and response I got was that the same thing was in place the year before and was renewed.

DW got the Venture card during 75k Promo last December ( we need about 2K more to hit 100K points 75K Miles transfer then will sock drawer).

Despite fine print the 10X points posted within a few days of the HOTEL. COM charge (even before stay) even on refundable reservations – So speculative bookings could possibly allow someone to have enough FF miles to book an award – not sure what would happen if you cancel the reservation after you transfer miles…..

huey judy
Guest
huey judy

Excellent post! It will take a great deal to pry me away from Ultimate Rewards but if the sign-up bonus is huge, I’ll definitely give them a try. For our particular spending, being able to book such a great diversity of hotels with such a small number of URs is huge. I’ll look forward to the launch of this card. I do hope it looks a little classier than your mockup, however!

YoniPDX
Guest
YoniPDX

The 2X everywhere else should be a given, considering the no AF is 1.5x everywhere and the Venture rewards $95 AF is 2X.

That said if they have equally strong travel protection as CSR as well 4X for all Travel categories and not just Airlines thru Cap1 OTA portal bookings. I would much prefer to deal either direct with Airline/Hotel than through OTA if possible (granted Chase is still an OTA for UR bookings).

I think they would need a strong initial sign-up bonus Say 100k-125K with $5K-7.5K along with equally strong travel protections since they are also not showing a PP or GE/TSA credit either as well as TRIPLE HP HIT TO APP.

Also they need loosen up UW – if you rarely carry a balance and have 750+ FICOs, unless they show you PQ in the online checker you can almost guarantee denial and you can even be under/over 5/24 (but still collecting biz cards) and get denied. Me and DW applied late November (she was PQ – but had new cards in 2018, I was not PQ but also had new Personal card in 2018 – I did check last month was PQ but offer was only 50K and I dropped below 5/24 in June -but had several HP as well).

Without these and the issues you brought up its a non-competitive dud that is only good for SUB (barring Venture card SUB bonus exclusions).

Nick Reyes
Editor

Are you comparing to the no-annual-fee Venture One card? If yes, that card earns 1.25x per $1 (not 1.5). Still, no disagreement that 2x is important for this premium Capital One card.

YoniPDX
Guest
YoniPDX

Yes, my mistake so few cards drop from 2X to 1.25X as a multiplier this is one of those outliers. Again this is all speculative at this point.

Even tho the Cap1 data breech mainly affected individuals who were customers or applicants for subprime cards and/or banking products from an article I read.

Capital One I think in many peoples minds is still viewed as a starter card or subprime credit issuer – even though they shifted focus from that market 10+ years ago. I don’t think that their recent partnering with Wal-mart helps them shed this perception, I just don’t really visually many people that shop at Wal-mart as carrying a card with a hefty AF unless they are primarily buying MOs. That said I’m sure that many frugal but well to do people shop at Wal-mart as well, I might do more often if parking lot traffic, convenient parking and lines were better.

Bill Van Tuinen
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Bill Van Tuinen

The “additional point bonuses at certain spend thresholds” could be the way they get to 2x for “all other” — maybe 10K points for every $10K spend or something to incentivize it becoming the “everyday” card.

Christian
Guest
Christian

I think the real problem is that Capital One’s miles are devalued from the start. One mile = 3/4 of an airline mile and can only be used for one cent. Better to have a 1:1 transfer ratio and better value through their portal while earning less miles per dollar.

Alex
Guest
Alex

Is anyone seriously in the game even able to get approved by capital one? They send you a prequalified mailer, do three hard pulls, deny you, and then leak your information. To hell with them.

CaveDweller
Guest
CaveDweller

Alex
I Wonder too I did 2 applies for the C1 venture card (Need It) over 7 months as in NO .I got the Barclays AA Bus card on Sat. (FM link) but had to call and Got it on the Call . My Fico is 810 and Barclays is hard BUT I got it ???
CHEERs

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Gary70
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Gary70

I don’t think one can compare single Capital One card to Chase Sapphire Reserve card. I am not an expert, but I believe that Chase suite is more powerful and beneficial then any other combinations at this point.