There is a reason to get and keep the Altitude Reserve card

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Last week, I argued that the main reason to get the US Bank Altitude Reserve card is for the signup bonus.  I argued that the card didn’t make sense for most people to keep beyond the first year.  It certainly isn’t the one perfect card, and you’ll most likely get quickly shut down if you try to use it manufacture spend.

That said, I do think there are reasons for some to get and to keep this card as a secondary card

Low cost, for many

If you tend to spend a fair amount each year on travel expenses, then the net cost of keeping this card is low.  Yes, there’s a $400 annual fee, but US Bank will also reimburse $325 in travel expenses each membership year.  For those who spend regularly on travel, this brings the effective annual fee down to only $75.  That’s not bad.

Big rewards possible through mobile wallet 3X

Samsung Pay MST

If you often pay for travel, you can certainly do well with the Altitude Reserve (which offers 3X for travel and mobile wallet purchases), but I’d argue that you could do better with a card like the Chase Sapphire Reserve, or Citi Premier, or Citi Prestige.

I think that the reason for some to get and keep the Altitude Reserve is that it offers 3X for mobile wallet purchases.

As more and more merchants accept mobile wallet payments, the Altitude Reserve will become more and more of a “3X everywhere” card.  There are other great cards that can be used for everyday non-bonused spend, but they top out at about 3% in rewards (see: Best rewards for everyday spend).  If you plan to use the Altitude Reserve points for travel, then the card’s 3X categories effectively offer a 4.5% rebate (since points are worth 1.5 cents each towards travel).

There are many types of mobile wallet purchases in which the best alternative in your wallet is likely to offer no more than 3% in rewards.  And, for many, the best alternative may be closer to 2%, depending upon which cards you carry.  But, even when the best alternative is 3%, the Altitude Reserve promises 1.5% better returns.

Break even points

How much would you have to spend on mobile wallet purchases that do not fit into any category bonuses in order to cover the card’s $75 annual fee ($400 – $325 in travel credits)?  The answer depends upon your best alternative*:

  • Compared to a 3% card, you would have to spend $5000 per year on mobile wallet purchases to break even.
  • Compared to a 2.5% card, you would have to spend $3,750 per year on mobile wallet purchases to break even.
  • Compared to a 2% card, you would have to spend $3,000 per year on mobile wallet purchases to break even.

Viewed weekly, we get the following:

 

  • Compared to a 3% card, you would have to spend $96 per week on mobile wallet purchases to break even.
  • Compared to a 2.5% card, you would have to spend $72 per week on mobile wallet purchases to break even.
  • Compared to a 2% card, you would have to spend $58 per week on mobile wallet purchases to break even.

From that point of view, the card seems like a no-brainer.  It should be easy to reach those spend amounts, right?  Not so fast…

 

* The numbers presented here assume that the best alternative card has no annual fee.

You should do more than break even

If the best you can do is break even, then there’s no point in bothering with this card.  The goal should be to earn significantly greater rewards, especially since the result is not cash back, but points that can be used for limited types of travel.  The Bureau of Transportation’s US airfare statistics show that the average fare in 2016 was $349 (down from $382 the year before).  So, let’s round up one dollar and somewhat arbitrarily say that our goal is to earn at least one round trip flight each year through the extra value given by this card over your best alternative.  In other words, at 4.5% in travel rewards, we want to be able to cover both the effective $75 annual fee and a $350 flight with the extra rewards earned compared to competing cards.

Here then, are the target spend amounts in order to earn “significantly more rewards” (cover the annual fee plus $350 in travel):

  • Compared to a 3% card, you would have to spend $28,333 per year on mobile wallet purchases to earn significantly more rewards.
  • Compared to a 2.5% card, you would have to spend $21,250 per year on mobile wallet purchases to earn significantly more rewards.
  • Compared to a 2% card, you would have to spend $17,000 per year on mobile wallet purchases to earn significantly more rewards.

Wow, those are big numbers.  Let’s convert them to per-week amounts in order to get a sense of what your weekly expenses would have to be to make this card worthwhile in the long run:

  • Compared to a 3% card, you would have to spend $545 per week on mobile wallet purchases to earn significantly more rewards.
  • Compared to a 2.5% card, you would have to spend $409 per week on mobile wallet purchases to earn significantly more rewards.
  • Compared to a 2% card, you would have to spend $327 per week on mobile wallet purchases to earn significantly more rewards.

These are still big numbers, but maybe not crazy big.  While I wouldn’t come close to those numbers without a bit of manufactured spend, I expect that many readers have spending patterns that would fit and where mobile wallet payments are accepted (or will be accepted sometime in the near future).

Using points

To get 1.5 cents value from each Altitude Reserve point, you have to book flights, hotels, or car rentals through the US Bank online rewards portal.  If past experience with US Bank’s FlexPerks program is any guide, you can expect the following:

Flights: Not all flights of interest will be available online.  Most will price correctly when present, but there will be exceptions.  You can call to book flights that are not bookable online or to argue for competitive price.  When flights are booked through this portal, you can add your frequent flyer number to the reservation. That way, you will earn miles and will be recognized for your elite status (if any).

Hotels: Hotel search results will be similar to that from other online travel agencies (e.g. Expedia, Orbitz, Hotels.com, etc.).  Prices will vary tremendously when compared to other sites.  If you can’t find the best price through the US Bank portal, you probably shouldn’t use your points for that trip.  Unlike flights, you cannot call to book hotels or car rentals.  When you book hotels through online travel agencies like this you won’t usually earn hotel points and your elite status usually won’t be recognized.

Car Rentals: As with hotels, search results will be similar to that from other online travel agencies (e.g. Expedia, Orbitz, Hotels.com, etc.).  Prices will vary tremendously when compared to other sites.  Unlike with hotels, there’s a pretty good chance here of getting very good prices.  If you can’t find the best price through the US Bank portal, you probably shouldn’t use your points for this rental.  Unlike flights, you cannot call to book hotels or car rentals.  When you book cars through online travel agencies like this you won’t usually earn car rental rewards and your elite status usually won’t be recognized.

As you can see above, there are significant downsides to paying for travel with points.  Personally, I’d use points primarily to pay for flights, but only when I can find the same best price available elsewhere.  Oh, and I might use points to pay for car rentals when the website finds particularly good deals.

Conclusion

If you spend heavily in the Altitude Reserve’s 3X categories (travel and mobile wallet purchases), the card may very well be worth keeping beyond the first year especially if you plan to use points to purchase travel.  Keep in mind, though, that you might not always get the best deal when booking travel through the US Bank website, and that with hotels and car rentals you won’t earn points and your elite status won’t be recognized.

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