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Earlier I wrote about rumors of a new high end credit card coming from Chase. Things that have been speculated include:
- That it will be a Visa Infinite card, only the second one issued in the U.S.
- That it will come with a 100,000 point signup bonus
- That it will offer triple points on travel and dining
- That it will have a $450 annual fee and offer a $300 airline fee credit
- That it will launch in August
At this point details remain very much in the realm of speculative, but they’re much talked about and exciting. It’s great to see more competition in the premium card space, especially as the Citi Prestige Card prepares to make changes to benefits (although the ‘over-indexed’ benefits remain available to new cardmembers and last through July 23 of next year).
However based on the speculation alone, the signup bonus is potentially exciting but it seems likely to be a better deal to get the Chase Sapphire Preferred Card with its 50,000 point signup bonus after $4000 spend within 3 months and double points on travel and dining.
Chase Sapphire Preferred Card has a $0 annual fee the first year, then $95. You get strong points-earning without the big annual fee. It takes a lot of travel and dining spend for 3 points per dollar to make up the higher cost of the card.
Airport Lounge Access
Travel cards bundle airport lounge access almost as an ante. The Platinum Card by American Express comes with Delta lounge access, access to American Express’ own lounges which are better than US airline lounges, and a Priority Pass Select card that gets holders into participating lounges — like Alaska Airlines lounges, many airline lounges in the US operated by foreign airlines, and lounges around the world.
American Express Centurion Lounge Bar, Houston
American Express partners with Delta, and Citibank partners with American. Chase partners with United (and Southwest, but Southwest doesn’t have lounges).
Chase’s Palladium card — which they do not provide very much public information about — comes with United Club membership although this is an unpublished benefit. New Palladium cardmembers need to call and request this.
United Club Entrance in Houston
For avoidance of doubt, I do not receive any commission or benefit from the Palladium, United Club, or Ritz-Carlton credit cards. I’ve collected information on these cards myself, and didn’t receive details from the card issuers.
Chase could bundle United Club access with a new premium travel card. But the annual fee might need to be higher. The Palladium card has a $595 annual fee versus a $450 annual fee for American Express Platinum, Citi Prestige, and the United Club Card.
If the price point is lower than Palladium (which is likely as high as it is to offset the cost of the metal which makes the card expensive to produce), then a Priority Pass membership is more likely. Palladium bundles Priority Pass with unlimited visits and one free guest. It would be interesting to see if a new Chase premium card comes with the same.
Airline Fee Credit and Global Entry/TSA Credit
Premium card annual fees are easier to swallow when they come with concrete rebate benefits like airline fee credits or Global Entry/TSA PreCheck application credits.
Card issuers may be able to negotiate a deal that brings back 25% – 50% of the cost of the Global Entra or PreCheck credit, so costs less to offer than face value. And this is an especially good one to offer consumers from a bank’s perspective because it’s something they only need to fund once every five years. A consumer may add the $85 or $100 benefit against the fee when considering the card, not considering the value proposition for out years.
Airline fee credits don’t cost issuers as much as cash because of breakage. Customers thing of them as being equivalent, but they aren’t. Many people won’t use them at all. If they do use the fee credit they’re unlikely to use the whole amount. And the fee credits have the added benefit to the card issuer of requiring the cardmember to use the card to take advantage of the credits, and get used to using the card for travel (and therefore likely for the majority of expenses surrounding travel, which for travel card users may mean frequent and large purchases).
Airline gift cards that look like fees increase the cost of offering these credits to the issuer, because they make it more likely that the cardmember will use the whole credit. They reduce breakage. But the simple way for an issuer to treat something as a fee is to check whether a charge is from a qualifying airline, and whether the amount is low.
Platinum Card by American Express and Premier Rewards Gold cardholders have been able to use their fee credits for gift cards even though that’s not how it’s supposed to work and American Express could change how they handle these credits in the future.
The Citi Prestige Card‘s $250 airline credit is an outlier because it doesn’t require spending be for airline fees at all, and unlike American Express there’s no need to choose an airline in advance either (something that also contributes to breakage). Instead the credit posts automatically even with the purchase of a qualifying airline credit.
I haven’t understood a lot of the economics of the card, which is why I’ve described it for some time as being too generous. Controls other premium cards place on benefits were seemingly absent from the Prestige Card for some time.
What a Real Premium Card Could Look Like
Chase partners with United, they should be able to work a deal to bundle United Club access along with Priority Pass. That would give the card a broad airport lounge network.
Triple points on travel and dining would make it a killer app for business travelers especially who are able to put their expenses on a personal card. That’s high volume spend.
Chase could offer a United elite status challenge. I’ve heard their Palladium Card comes with GHA Black status, so that could be an option for this card. But they have hotel relationships with both Marriott and Hyatt. Marriott Gold and Hyatt Platinum make sense. And they have a deal with Hertz as well, so Hertz status could round out the elite offerings.
With United, Marriott, and Hyatt status, a strong lounge access network, and strong earning — plus Global Entry and airline fee credits — they’d have a super-competitive card. And the price point on the card could be higher as well to support a premium look and feel, along the lines of their Ritz-Carlton co-brand which feels like heavier metal than Sapphire Preferred.
Rumor is though that it won’t have the super-premium look and feel of the Palladium.
Visa Infinite Helps Fund Bigger Benefits
The fact that there aren’t many Visa Infinites in the U.S. will make the product seem exclusive to some, but Visa Infinite doesn’t offer many benefits beyond what a Visa Signature would provide. Most benefits are added by the issuer, not the payment network, though the payment network’s offerings provide a platform for the issuer to pick and choose from.
City National Bank issues a Visa Infinite card. The bank itself focuses on high net worth clients, and aims this card at those clients. The most attractive thing about the card isn’t Visa Infinite benefits, though, it’s that the airline fee credit applies not just to the primary cardholder but to additional cardholders as well, and additional cardholders are offered at no additional fee. So you can make good money on the card.
US Bank used to offer a Stratus card that was Visa Infinite but I don’t believe that’s available any longer.
What Visa Infinite does get, though, is higher merchant fees. If Chase is able to draw more revenue off of interchange, that can fund additional benefits. And it does so likely without raising costs. Chase has a 10 year deal to lease Visa’s network that gives them a fixed cost no matter the volume of transactions pushed through that network. So the more spend they drive through, the lower the cost per transaction.
Who Will This Be Available To?
Before getting too excited, it’s worth bearing in mind that Visa Infinite cards are going to have a higher qualification threshold than Visa Signature cards, which are how most Chase travel cards are issued.
Visa Signature has a higher approval threshold than other Visa cards as well. That’s why Bank of America, for instance, has been known to issue lesser cards with lower signup bonuses to some applicants — those applicants aren’t getting approved for the Visa Signature version of the product.
So calling the new card a Visa Infinite may take it off the table for some applicants, whether based on credit score or income or other criteria.
We also don’t know who the card will be marketed at. Most likely they’ll be attacking the Platinum Card by American Express space and the Citi Prestige Card space.
But they have a premium card already — Palladium — aimed at their Private Bank and Private Client customers (who they also target with Chase Sapphire Preferred — and indeed, Sapphire Preferred earns double points on dining which Palladium does not and for a much lower annual fee). There have long been rumors of a revamp of Palladium. Will this new card be in place of a Palladium revamp? Will it primarily be marketed towards Chase’s high net worth clients? We don’t yet know.