Consumers Rethink Card Loyalty as Premium Fees Rise

Holders of premium credit cards are reportedly paring down the number of such cards they carry after recently announced increases in annual fees.

These moves come after JPMorgan Chase raised its annual fee on its Sapphire Reserve card by 45% to $795 in June, and American Express said in September it was raising the annual fee on its Platinum card by $200, the Wall Street Journal reported Monday (Oct. 6).

Three cardholders interviewed by the WSJ said recent fee hikes prompted them to compare the benefits of their premium cards — in one case, by putting together a spreadsheet — and then focus their spending on one while closing the other.

A fourth cardholder told the WSJ that he ended up keeping a high-fee card for another year after calling to cancel it and being offered a statement credit in exchange for a specified amount of spending on the card.

Issuers are adding greater sign-up bonuses benefits to their high-fee cards to retain customers, according to the report.

The report cited a Bank of America finding that less than 15% of cardholders pay more than $250 in annual fees and a J.D. Power finding that those who pay annual fees of $500 or more spend three times more than other cardholders and are less risky because three-quarters pay the card’s balance each month.

It also said that Bank of America found American Express’ retention rates went up after previous fee hikes and that J.D. Power found the holders of high-fee cards are generally more satisfied with the cards than other cardholders are with theirs.

The PYMNTS Intelligence report “How Consumers Decide Which Credit Card to Pay With” found that while only one in five cardholders owns a premium card with an annual fee of over $100, they are incredibly engaged, with more than half making that card their primary payment method.

Premium cardholders are the most loyal shoppers, as they are determined to get their money’s worth by using the cards frequently to maximize benefits, and they are more than twice as likely as other cardholders to take advantage of their card’s special offers, according to the report.

When Chase announced changes to its Chase Sapphire Reserve card in June, it said the premium card offers users $2,700 in yearly benefits and focuses on the things that are most important to cardholders, including travel, dining, entertainment and service.

When American Express announced a sweeping upgrade to its U.S. Consumer and Business Platinum Cards in September, Raymond Joabar, group president, Global Commercial Services at American Express, told PYMNTS CEO Karen Webster that the company aimed to deepen member loyalty and stay ahead of rivals.

“We listen to and talk to our card members all the time,” Joabar said. “And what customers have been telling us is they wanted to have more rewards for the spend that they will incur and are always looking for new sets of tools to help them run and grow their business more efficiently.”