American Express felt bullish enough about second-half spending to hike the annual fee of its Platinum card 25% this month, but JPMorgan Chase is taking a more cautious approach by trimming fees and adding features a top-tier credit card.
Defying a trend that has seen elite cards’ annual fees steadily increase over the years, Chase recently notified customers of a slight reduction in the annual fee for its JP Morgan Reserve credit card. After Nov. 1, 2021, the card will cost $ 550 per year, down from $ 595, with some new perks added.
The fee for the JP Morgan Reserve card, available only to private-banking customers, now matches Chase’s popular Sapphire Reserve luxury consumer credit card, which currently offers a hefty sign-up bonus at a price more than $ 100 lower than Amex’s revamped $ 695-a -year Platinum card. Chase was not available to comment on the changes.
The diverging strategies for the highest-end mainstream credit cards from Amex and Chase underscore complex marketing dilemmas credit card issuers face as leisure travel rebounds this summer but business travel remains lethargic and economic trends are uneven.
Consumers continue to be shy about using revolving credit, with some opting instead for simpler installment loans from the likes of Affirm and Klarna, which have seen growing usage over the last year while credit card receivables generally stagnated.
“Business travel – which plays a big role in driving spending on high-end rewards credit cards – isn’t coming back until at least this fall, so elite credit card programs face tough choices in keeping customers interested,” said Wei Ke, managing partner at Simon-Kucher & Partners, a New York-based consulting firm.
Anxious to retain customers during the pandemic, many luxury credit card marketers temporarily waived annual fees and shifted rewards categories away from travel to emphasize everyday spending on food and entertainment, blurring differences between travel and lifestyle reward card programs, according to Ke.
As a result, cobranded cards tied to airlines, hotels and cruise lines may face the biggest challenges in recovering their momentum when travel broadly resumes, observers say.
“A lot of elite card issuers gave customers alternatives to travel for earning and burning points, but there were risks to that approach because travel rewards programs have historically been a very good way to make customers stick around,” Ke said.
The various industry disruptions portend a major credit card marketing battle in the months ahead, and Amex’s recent Platinum card fee-hike was the opening salvo, according to experts.
“Amex was very bold by going out with a significant card-fee increase, but the Platinum card has always tended to be at the top of the spectrum in the luxury card sector,” Ke said.
Other issuers – especially those with cobranded airline and hotel cards – will likely tread carefully before raising fees, said Brian Riley, head of credit card advisory for Mercator Advisory Group. While most travel card issuers’ fees have stayed steady, issuers may adjust them soon in response to competitive and economic pressures.
“A battlefield will amp up as many cardholders whose annual fees were waived during COVID-19 face a decision on whether or not airline cobrand cards are worth the money,” Riley said.
Given ongoing COVID-19 spikes in different countries, it’s unclear when global business and leisure travel will return to pre-pandemic levels. Travel rewards card issuers will likely continue to finesse the situation by adding limited-time benefits, softening fees and dangling incentives for card users to use rewards points immediately at a temporarily higher value, Riley said.
“Credit card issuers looking to retain existing cardholders and rebuild their account base may need to remind consumers about the relationship value. This is especially important as airline reward program points continue to pile up and stagnate, causing mainstream credit card companies to juice up reward benefits, ”Riley said.
By easing the annual fee for its JP Morgan Reserve Card, Chase created an opportunity to send notification letters that remind existing customers of the card’s value while sweetening the deal without raising costs.
In addition to lowering the annual fee for its JP Morgan Reserve Card, Chase recently added a $ 120 annual statement credit for Peloton exercise bike membership, a perk newly available to Chase Sapphire Reserve card users. Chase continues to give Sapphire Reserve and JP Morgan Reserve customers 50% more value for points redeemed at supermarkets and restaurants through Sept. 30, 2021.
Through the end of this year, both Chase cards’ customers may continue to earn points toward a $ 300 travel credit card at gas stations and grocery stores, a perk not available with Chase’s lower-tier rewards cards.
Because card revenue was low during the pandemic, issuers must carefully balance the cost of new benefits and incentives, said Jessica Duncan, director of payments insights at Competiscan, a Chicago-based marketing analysis firm.
“Maintaining these promotional programs is costly for issuers so they’re structuring incentives to capture consumers looking to switch to a new card from the one already in their wallet,” Duncan said.