A leaked internal JPMorgan Chase memo indicated that the issuer will be cutting rewards perks available to cardholders of the bank’s ultra-premium Sapphire Reserve card, according to Business Insider.
The cuts would come in three key areas: the elimination of price protection, which allowed users to claim up to $2,500 a year in refunds on reduced-price products within 90 days of purchase; limits on the number of guests users can bring into Priority Pass lounges; and the end of accelerated earnings on purchases that also claim travel rewards. Chase confirmed the cuts, which will take effect in late August.
Sapphire Reserve propelled an industry-wide shift, but that didn’t come without setbacks. At launch, Chase Sapphire Reserve was so popular that the bank reportedly exceeded its one-year sales goal in the first two weeks after launch, and grew card accounts by over one-third in its first quarter. Sapphire Reserve’s popularity, combined with high credit appetite in the US, led other banks to launch comparable ultra-premium cards as a means to tap into that same market and see those same gains.
But it was costly for the bank. The sign-up bonus that propelled early gains was so costly that the bank halved it within months. And Chase lost $900 million from card-related headwinds in 2017, many of which were due to Sapphire Reserve. As the bank waits to break even — it reportedly won’t for over five years — it’s also looking to cut about $200 million in costs from the card unit.
These changes could help make those cuts, but they may make the card less appealing.
By shifting benefits, Chase can save some money.It’s unclear exactly how much Chase is poised to save, but the $2,500 per customer savings from cutting the purchase protection alone could add up, according to Business Insider. Likewise, eliminating crowding in Priority Pass lounges and collecting fee revenue from customers who want to bring extra guests might help the firm as well.
But it might make the card less appealing. Sixty-eight percent of customers said that rewards are one of the top features on their favorite credit card, up nine percentage points from the prior year. But Sapphire Reserve’s changes make it more like other ultra-premium cards, which means that its offerings could be less of a standout among customers.
Last year, over 90% of the card’s users renewed, and in turn agreed to pay the $450 annual fee after the first year. But this shift could mitigate that and push customers toward other, similar cards that could be cheaper, which in turn might negate some of the benefits Chase is hoping to gain.