Cap One to take on Sapphire Reserve?

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Update: The Capital One partnership with Hotels.com is ending on January 31, 2020.

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 Capital One® Venture One® Rewards Credit Card and Capital One® Venture® Rewards Credit Card, but this partnership is ending on January 31, 2020.  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)
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