Value seekers warm to a $450 annual credit card fee
Seldom does a new credit card go viral.
There are the unboxing videos posted on YouTube: People exulting in receiving the precious new metallic rectangle, lovingly unwrapping it.
There are message boards and blogs dedicated to obsessing over it, with more than 6,000 comments on a Reddit discussion.
It is so popular that JPMorgan Chase, which issues the card, ran out of the engraved card’s fancy metal stock in only 10 days, and had to send out a temporary plastic placeholder.
But the Chase Sapphire Reserve card has done more than generate product hysteria. It has also intensified the race among large credit card issuers, which are introducing increasingly lavish rewards programs to capture affluent consumers who spend large sums on travel and recreation, but no longer want to be bound to one particular hotel or airline’s affinity program.
The price for these premium cards can seem outlandish: $450 a year. But for a growing number of customers, the math makes sense. Cards that were once more about elite service and social status are now emphasizing their bottom-line value proposition — even when it comes with a hefty annual fee.
“American Express used to have a stranglehold on the high-end market, but folks like Chase and Citi are coming hard after their crown,” said Matt Schulz, an analyst for CreditCards.com, a comparison site.
Perhaps as a sign of the strengthened economy, the major issuers say demand for their premium cards is rising. The number of Citi Prestige cardholders increased sixfold in the last 18 months, according to a company spokeswoman, and American Express says its Platinum card membership is “large, growing and loyal.”
Customers seem more willing to consider shifting from free cards to ones with fees and better perks.
“Around the recession, we saw promotional innovation in the cashback space,” said Andrew Davidson, a senior vice president of Mintel. “Now, I think we might start seeing more innovation around points and miles in the premium space.” The new Chase card has shaken things up, he said. “American Express and Citi will be forced to re-evaluate their cards’ value proposition.”