Mercator Advisory weighs in on the issue of high-fee, high reward premium travel rewards [available here to subscribers] and the topic is boiling in the media. Are the features great? [we think so]. Are the metal cards cool? [definitely]. Do they have a future? [we think they are fleeting]. Are they sustainable? [we think not]
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Chase’s Sapphire Reserve Card was introduced last August with a 100,000-point sign-up bonus, worth $1,500 using Chase’s rewards program, a $300 annual travel credit, and no foreign transaction fees, among other perks. Even with the huge fee, customers ate it up.
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Demand was so high that Chase temporarily ran out of the metal alloy used to make it.
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Some customers who now have both an AmEx Platinum and Chase Sapphire Reserve are paying a combined $1,000 a year in fees for them.
The standard annual fee is $450, which I note is the same amount I received for my first credit card, back in 1980. $450 is not a bad annual fee when you receive over $1000 in benefits, but we do not see second year strategies and expect that the attrition rate for these cards will skyrocket when people have sticker shock from the card
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The early adopters of the Chase Sapphire Reserve card will be deciding soon whether to renew and once again pay the $450 annual fee.
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While the card gets strong reviews from users, it’s not clear whether that will be enough to assuage the sticker shock of the annual fee, analysts say.
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Industry analysts said they did not believe Chase’s 100,000-point Sapphire promotion was sustainable, and the company did cut its sign-up bonus to 50,000 points roughly six months after the launch. Chase has said it was never meant to be permanent.
Another problem, as Mercator Advisory Group identifies in the article: “Everyone is chasing the same pool of people,” said Brian Riley, a director at bank consulting firm Mercator Advisory, who has worked in the credit card industry for more than 25 years.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
Read the full story here