Chase Sapphire Preferred® Card, Starwood, Or Freedom? A Guide For Which Cards To Use For Any Purchase.

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AsherO, one of the most prolific DansDeals Forum members with over 8,000 helpful postings, posed that question yesterday. Basically should people be chasing after Starpoints or Ultimate Rewards points these days and which card will give the best bang for the buck at which stores?

The gist of the discussion as summarized by AsherO is this:
Chase Sapphire Preferred® Card:
-Dining and Travel
-Foreign transactions.

Starwood:
-Purchases over $90
-Purchases where you may need to dispute the charge, return the item to AMEX within 90 days, or may need an extended warranty year.

Freedom:
– Anything else

Scroll down to the bottom of this post for a much more detailed spending summary, or feel free to read through the logic behind the answer, as follows.
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First a quick refresher.

Ultimate Rewards is Chase’s point currency. You earn them on lots of different cards, but only someone with a Chase Sapphire Preferred® Card card or Ink Bold Business card can actually transfer them into real miles or points. The good news is you can transfer points between cards and even to different people. And while there are only 3 airline (Continental/United, British Airways, and Korean) and 3 hotel transfer partners for now, there is an option from all 3 alliances, so from there you can book travel on dozens and dozens of airlines. Plus you can transfer to Hyatt, Marriott, or Priority Club. Transfers are instantaneous and tax-free.

Starpoints can be transferred to dozens of different airlines and at a favorable ratio. 20K Starpoints can get you 25K miles on most airlines or even 50K on LAN. A notable holdout is Continental/United, where 20K Starpoints earns just 12.5K miles. Still you can always transfer 20K Starpoints into 25K on USAirways or Air Canada to book travel on Star Alliance carriers like Continental/United. Transfers are tax-free, but can take anywhere from a couple days to a couple weeks, which can be tricky if you have an airline award to book quickly. Of course Starpoints can also be used on hotel awards, like unrestricted nights/5th night free award, awesome cash and points awards, and combo awards like nights and flights. All of which now help you qualify for Starwood elite status.
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Now to figure out which card to use in each situation you need to set a value to each currency. That is hardly an easy task as value is very subjective. All I could do is tell you how I value them.

Now the beauty of “real” miles and points (as opposed to “fake” miles and points from Citi Thank You or Capital One) is that the sky is the limit. You can pick up a $100,000 worth of first class flights around the world for 200,000 miles and your miles are worth 50 cents each. Of course that’s not a typical redemption, that’s the beauty of them and what I personally strive for.

To be fair though I guess their value would be the lowest rate at which I would use a mile.
For Ultimate Rewards that would mean a transfer to Continental where I probably wouldn’t redeem a mile unless it saved me at least 1.9 cents. Hyatt points are normally worth slightly less. The most they could be worth would be about 6 cents each, but I’d probably give them a value of about 1.6 cents.  The nice thing about Hyatt is that even their ultra-luxury Park Hyatt line of hotels only charges at most 22,000 points per night, a small fraction of the points required for high-end properties at any other hotel chain.

Starpoints can be worth 1.25 or 2.5 times the value of the miles they are transferred into or can be used for hotel stays also at exceptional values. But for arguments sake I would probably not redeem them for less than 2.3 cents each.

Which gives us a ratio of 2.3 cents:1.9 cents, or 1 Starpoint being worth about 1.21 Ultimate Rewards point.

Now that we have that determined you can decide which card to use in different scenarios.

Starwood Consumer (First year free, then $65) gives 1 Starpoint per dollar spent and 2 Starpoints per dollar spent at Starwood hotels.

Starwood Business (First year free, then $65) gives 1 Starpoint per dollar spent, 2 Starpoints per dollar spent at Starwood hotels, and gives cash back on top of Starpoints when spending at Open Savings stores. (Airtran: 5%. Barnes & Noble: 5%, Fedex: 5%, Flowers.com: 5%, Hyatt: 3%, HP: 5%, Microsoft: 5%, Courtyard/Fairfield/TownePlace/SpringHill/Residence Inn by Marriott:5%)

Chase Freedom (No annual fee), assuming you have a Chase checking account, gives 1.1 points per dollar spent, 10 points per transaction, and rotating 5 points per dollar (up to $1,500/quarer) categories
(For 2011 these categories are:
Q1: Grocery Stores, Drugstores
Q2: Home Improvement, Lawn and Garden, Home Furnishings
Q3: Gas, Hotels, Airlines
Q4: Dining, Department Stores, Movies, Charity).
All of those points post to your account monthly.

Chase Chase Sapphire Preferred® Card® Card (First year free, then $95) charges no foreign exchange fees, and gives 1.07 points per dollar spent, 2.14 points per dollar spent on dining, airfare, hotels, car rentals, charges in airports, travel agencies, caterers, timeshares, trains, buses, taxis/limos, ferries, bridges, tolls, and parking, and 3.21 points per dollar if booking travel via the Chase booking tool.
Having the Chase Sapphire Preferred® Card also allows all Chase points to be converted into real miles/points.  The extra .07/.14/.21 bonuses post to your account every January or February.

When to use each one?

Let’s take a $50 transaction at the ballpark.
Freedom: 65 points, at a value of 1.9 cents=$1.24 rebate
Starwood: 50 Starpoints, at a value of 2.3 cents=$1.15 rebate
Chase Sapphire Preferred® Card: 53.5 points, at a value of 1.9 cents=$1.02 rebate

What about $100 at the ballpark?
Starwood: 100 Starpoints, at a value of 2.3 cents=$2.30 rebate
Freedom: 120 points, at a value of 1.9 cents=$2.28 rebate
Chase Sapphire Preferred® Card: 107 points, at a value of 1.9 cents=$2.03 rebate

What about $5,000 on new furniture and appliances?
Starwood: 5,000 Starpoints, at a value of 2.3 cents=$115 rebate
Freedom: 5.510 points, at a value of 1.9 cents=$104.69 rebate
Chase Sapphire Preferred® Card: 5,350 points, at a value of 1.9 cents=$101.65 rebate

Once you get past $90 per transaction you start earning more of a rebate (given my values of each currency mind you) when using Starwood.  The more you spend in a transaction the more skewed it will become towards Starwood. For $90 and less though you will actually do better by using Freedom.

If the appliances have a 1 year warranty though for example, you may find that putting the charge on the AMEX is invaluable as their warranty coverage often provides a full refund of the purchase price in the extended warranty year.
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What about spending $50 on a taxi?
Chase Sapphire Preferred® Card: 107 points, at a value of 1.9 cents=$2.03 rebate
Freedom: 65 points, at a value of 1.9 cents=$1.24 rebate
Starwood: 50 Starpoints, at a value of 2.3 cents=$1.15 rebate

Obviously go with Chase Sapphire Preferred® Card there.
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What about spending $50 at a museum overseas (assuming a 1:1 exchange ratio)
Chase Sapphire Preferred® Card: 53.5 points, at a value of 1.9 cents=$1.02 rebate
Starwood: 50 Starpoints, at a value of 2.3 cents=$1.15 rebate, less 2.7% ($1.35) forex charge=Negative $0.20
Freedom: 65 points, at a value of 1.9 cents=$1.24 rebate, less 3% ($1.50) forex charge=Negative $0.26
Obviously go with Chase Sapphire Preferred® Card there as well.
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What about spending $50 on Airtran?
Starwood Business: 50 Starpoints, at a value of 2.3 cents=$1.15 rebate. Plus 5% ($2.50) Open Savings Rebate for a total rebate of $3.65.
Chase Sapphire Preferred® Card (booked via Chase airfare tool): 160.5 points, at a value of 1.9 cents=$3.05 rebate
Chase Sapphire Preferred® Card (booked via Airtran.com): 107 points, at a value of 1.9 cents=$2.03 rebate
Starwood Consumer: 50 Starpoints, at a value of 2.3 cents=$1.15 rebate.
Freedom: 65 points, at a value of 1.9 cents=$1.24 rebate

Starwood business comes on top there. Of course if it was any other airline or if you don’t have a Starwood Business card then Chase Sapphire Preferred® Card would rule.
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What about spending $50 on charity this month?
Freedom: 265 points, at a value of 1.9 cents=$5.04 rebate
Starwood: 50 Starpoints, at a value of 2.3 cents=$1.15 rebate
Chase Sapphire Preferred® Card: 53.5 points, at a value of 1.9 cents=$1.02 rebate

Then there are the intangibles.
AMEX is much better than everyone else at disputes, return protection, and extended warranty.

Head spinning yet?
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Here’s the more detailed summary of where to spend on which card:
Chase Sapphire Preferred® Card:
-Foreign transactions.
-All dining, airfare, hotels, car rentals, charges in airports, travel agencies, caterers, timeshares, trains, buses, taxis/limos, ferries, bridges, tolls, and parking that are above $11. If they are below $11 then you’ll do better on the Freedom card.
Exceptions to the above rule:
-Airtran, Hyatt, Courtyard/Fairfield/TownePlace/SpringHill/Residence Inn by Marriott spending should go on Starwood Business card.
-Starwood hotel spending should go on any Starwood card.
-If you have your own personal car insurance that covers car rentals you should use a card like Continental OnePass Plus or United MileagePlus Explorer that give free primary CDW insurance so that you don’t have to file a claim with your own insurance first.
-Check to make sure that the purchase isn’t covered by a Freedom 5 point per dollar rotating category like Dining in Q4.

Starwood (Consumer or business):
-Purchases greater than $90
-Spending at Starwood hotels.
-Purchases where you may need to dispute the charge, return the item to AMEX within 90 days, or may need an extended warranty year.

Starwood Business:
-Purchases at Open Savings partners go on Starwood Business (Airtran: 5%. Barnes & Noble: 5%, Fedex: 5%, Flowers.com: 5%, Hyatt: 3%, HP: 5%, Microsoft: 5%, Courtyard/Fairfield/TownePlace/SpringHill/Residence Inn by Marriott:5%) as they earn Starpoints on top of cash back.

Freedom (with Chase Checking)
-Everything else, namely:
-Purchases under $90 that are not dining/airfare/hotels/cars.
-Purchases under $11 that are dining/airfare/hotels/cars.
-Purchases that won’t take AMEX.
-Purchases (up to $1,500/quarter) in a 5% rotating category (after registering online)
(For 2011 these categories are:
Q1: Grocery Stores, Drugstores
Q2: Home Improvement, Lawn and Garden, Home Furnishings
Q3: Gas, Hotels, Airlines
Q4: Dining, Department Stores, Movies, Charity)

Want to maximize your purchases even more?

Get the Chase Ink Classic Business card which gives you 5 points per dollar on wireless, landline, cable services, and office supplies, and 2 points per dollar on gas and lodging all year long.  With a Chase Sapphire Preferred® Card or Ink Bold card all of those points can be transferred into airline miles or hotel points.

The American Express Premier Rewards Gold Chase Card gives 3 Membership Rewards points per dollar spent on airfare and 2 points per dollar spent on gas and groceries but carries a hefty $175 annual fee after the first free year.