Credit Card Benefits: Banks Go Left; Amex Goes Right

Raising the Rates for Premium Credit Cards: Good Timing or Revenue Solution?

Raising the Rates for Premium Credit Cards: Good Timing or Revenue Solution?

Many credit card issuers are trimming back cardholder benefits.  Time will tell whether this is a prelude to reduced awards; until then, keep an eye on American Express.  Instead of cutting benefits, Amex is ramping up their offerings.

In recent months, we’ve observed Discover eliminating Auto Rental Insurance, Flight Accident Insurance, Purchase Protection, and Return Guarantee on their IT Card, while travel premium card Chase Sapphire excluded Price Protection, added limits on Priority (airline lounge) Pass, and the bonus travel annual incentive kicker.  Even Citi knocked out or changed 6 product features, from Trip Cancellation to Citi Price Rewind.

American Express is moving in the other direction as this story picked up by Nasdaq.Com, posits.

Not every customer takes advantage of these features, but the value can be as significant as rewards.  In the last 12months, I received $25 back from Citi on their price rewind (for a pool sweep) and another $18 for Monster exterior Bluetooth speakers.  That $43 is equivalent to spending $43,000 on a credit card that paid $1 in points for each $100 spent (1%).  Even with a 2X multiplier on points, it would have taken more than $20,000 in spending to save what I got back from Price Rewind.

That’s one of the conundrums of credit card points. People aspire to free trips to Hawaii, or cash deposits, but someone has to pay for them.  Some money comes from the interchange and other comes from well-intended revolvers who carry balances from month-to-month at 23% APRs.

Several takeaways here.  First, this is an indication that the current credit card rewards model is under stress.  Rolling back benefits is a bit of a hedge, though it is unlikely that it will repel the issue for long.

Second, take a look at “the new” American Express, which is meeting credit cards head-on.  Amex has plenty of experience in payment cards, is rebuilding their efforts under a new CEO who is well ingrained in the cards business.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

Exit mobile version