Premium credit card companies are going all out to vie for the attention of signups. JPMorgan Chase started this fight when it announced its new Sapphire Reserve rewards card.
The card was a pretty sweet deal. It came with amazing perks, including up to $1,500 in rewards as a sign-up bonus. The card itself was made out of a mixture of metals, and the annual fee was $450. So many people signed up for this card that Chase actually ran out of the metals it needed to make the cards.
It was an amazing move, in all honesty. Even though JPMorgan lost $350 million, this card was an eye opener. It made American Express and other premium card companies step up their game, but it also allowed Chase to prove two things. First, the premium card market is not as tiny as we all thought it was. Second, a high fee is not going to stop people from buying your product. You just have to package it correctly.
American Express Fires Back
Once Chase reduced its sign-up bonus points to 50,000, American Express jumped in and threw its weight around. First, they raised the annual fee for their Platinum card to $550. Next, they gave their members a lot of new perks, including monthly credits for Uber rides. And if you're traveling, the perks you get from Amex Platinum is enough to make you drool.
Amex seems to have gotten a leg up on their competition, but there are a couple of reasons that people may not want to hold onto their Platinum credit card. One of the most notable ones is everyone doesn't use Uber.
The Uber credits are given out at $15 a month. In December you get an extra $5. These credits don't roll over, so if you don't use them, you lose them. That's almost $200 wasted a year.
Of course, if you're paying $550 for a card, then what do you care?
Actually, even though the rewards are pretty sweet, Chase Sapphire Reserve still wins in most categories — at least for a traveler. But another lesson that this fight has taught us is that people don't like to be without. Amex will always have diehard, faithful customers who will not give up their cards for anything. A raise in annual fees and a few fewer perks from the other guys isn't going to stop them.
What Does This Mean For You?
If you're a business owner, it means you've got another company you can learn something from.
If you're the kind of person that cringes at the thought of paying hundreds of dollars in fees, then you can still take away something from this.
As a business owner, the price of your product says a lot to a consumer. With Chase and Amex, it told consumers that if they wanted to be treated special, they needed to pay for it. And they did. They had no problem doing it. In fact, they're still doing it since their card is still the talk of the town. Other cards are starting to emulate them.
Can you raise your price and justify it to your customers? Of course, you can. Perhaps you need to offer a few more perks to justify the price, but don't underestimate people's willingness to spend money.
Being the cheapest isn't always a good thing. There are a lot of people who will pay more just for quality alone. Those are the people that you want to attract and do business with. You'll need fewer clients to make the same amount of money, which means you'll have more time to do other things.
If you just don't understand how people can justify spending this kind of fees on a credit card, you have every right to your opinion. It isn't exactly wrong. Just like other people justify their ownership of this card, you can justify why you'd never sign up for one.
Some of us are in the middle of choosing a credit repair company. We really made some mistakes and messed up. Some of us already repaired our credit, or just have great credit and don't want to make any mistakes. That's understandable. Again, there is nothing wrong with that.
But understand that this will have a trickle-down effect. It won't be long before other credit card companies start offering awesome rewards and perks to regular members just to get them to sign up. Can you honestly say you'll be able to resist those perks if they come with an affordable annual fee?
If you do, good for you. You've got a will of iron.
If you don't, that's OK too. But you're always welcome to join us on the dark side. We have cookies.
Brian Rashid is an international speaker and writer. Please say Hi at connect@brianrashid.com.
