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Mid-last week I was speaking at industry conference Card Forum and caught up with a senior vice president at US bank. We got to chatting about the new Altitude Reserve card, US Bank’s entry into the premium card space.
I told him I was impressed by their move to contain costs while offering a premium product, citing the Priority Pass Select card that comes with 4 visits per year not unlimited visits like so many other premium cards offer and also their $325 travel credit which is based on cardmember year rather than calendar year (meaning cardholders couldn’t “double dip” on the credit in their first year).
The biggest benefit of the card in my view is triple points on mobile payments, I thought that could get expensive and we chatted about the controls they have in place. He did note though that it’s something they’ve budgeted to get more expensive. When a cardmember sees their annual fee and asks themselves is this card going to get more or less valuable in the coming year increased availability of mobile payments makes the answer more valuable.
I’ve never really understood why banks offer their travel credits on a calendar year basis but annual fees are on a cardmember year. If you sign up for a card now, you get the travel credit in the back half of 2017 and again at the beginning of 2018 all for one annual fee. In other words, the travel credit can be larger than the fee itself.
The Citi Prestige Card has a $250 airline travel credit. Buy a ticket, trigger the credit. The card’s annual fee is $450. So you can come out ahead in the first year, signup bonus and all the other benefits of this premium card aside.
The Platinum Card by American Express offers $200 airline fee credits. Those aren’t supposed to work on airline tickets, but I’ve always personally had success with $100 American Airlines e-gift cards (I select American as my airline of choice for the benefit). That almost pays for the $450 annual fee, and the card is how I get my Hilton Gold status and Centurion lounge access.
Premier Rewards Gold Card from American Express offers a more extreme example. The $100 airline fee credit works much the same way as the Platinum card’s does. Since it’s based on calendar year, you can get it twice in your first cardmember (annual fee) year. And it has a $0 intro annual fee for the first year, then it’s $195.
The Chase Sapphire Reserve Card is a $450 annual fee card that comes with a $300 travel credit. Its credit is especially broad, working on all things that code as travel such as airline tickets, hotel stays, or even Uber. The fee credit has been calendar year (all the statements which close in a given year) which meant you could double dip the credit.
That’s changing (HT: Doctor of Credit)
Here’s the verbiage from the Chase website:
$300 Annual Travel Credit: A statement credit will automatically be applied to your account when your card is used for purchases in the travel category, up to an annual maximum accumulation of $300. Annual means the year beginning with your account open date through the first statement date after your account open date anniversary, and the 12 monthly billing cycles after that each year. (For applications submitted before May 21, 2017, annual means the year beginning with your account open date through the first December statement date of that same year, and the 12 billing cycles starting after your December statement date through the following December statement date each year.) Call the number on the back of your card to see when you are eligible for your next $300 Annual Travel Credit.
- The fee credit will be changing to cardmember year
- Applications submitted before May 21 still get the ‘old method’ in year one
Nothing has yet changed for existing cardmembers although of course it’s only possible to ‘double dip’ in year one anyway.
One of the things the card has had going for it is this travel credit, that year one double dip made it an easy sell for many to swallow the $450 annual fee. I find that many readers get started with the Chase Sapphire Preferred Card since that has a $0 annual fee the first year, then $95 (‘try before you buy’).
The $450 fee is meant to be a barrier to signing up for a premium card. They kind of cardmembers they want for the card, with heavy spend, are the ones who aren’t going to think too hard about a $450 fee. Folks who have to think carefully about the financial decision, perhaps because they aren’t spending as much, aren’t the target market for the card (even if frequent flyer enthusiasts make great use of it).
Sapphire Reserve no longer offers a 100,000 point signup bonus. Now they’re scaling back a bit more on the cost side of the equation. This idea comes just after US Bank implemented a similar approach, though it’s not clear if Chase’s plans predated knowledge of US Bank’s strategy.