Last week I wrote about Chase announcement to increase the annual fee of their Sapphire Reserve Visa Infinite Card to $550 per year which had already provoked a lot of responses all over social media.
First of all after following all these comments on different channels I have to admit that I’m surprised how angry people get over something like a bank increasing the fee on one of their credit card products. It’s almost like there is some sort of emotional attachment to the card when in reality (at least to me) it’s just a business tool – if it doesn’t work anymore for me I just move on.
You can find the original article I wrote last week right here.
Meanwhile there were certain voices out there who made a lot noise around this situation, trying to calm the waters and tell people how the CSR card is still an awesome product, totally worth the money.
Spoiler alert: I won’t make these (or any) excuses for Chase because we don’t have a dog in this game since we never posted referral links for credit cards or received any type of sponsorship for financial products.
However I think one important part to approach this entire episode is to understand why Chase made the decision to hike the fee on their card.
The short answer to that is that the card was either too cheap, too generous or both. Maybe not something we like to admit but it’s absolutely the case.
Chase made a big splash when they introduced the card with a 100,000 Ultimate Rewards points signup offer that went down to it’s current opening bonus of 50,000 points. Both amounts are worth cold cash to the bank but so is a customer relationship, especially if said customer should ever keep a balance on the card.
The fee is $450 which sounds high but then let’s see what it costs Chase to maintain this card for their customers:
- $300 cash back through the extremely flexible travel credit
- $100 Global Entry / TSA Precheck Credit every five years ($20 value per year)
- Priority Pass membership including restaurant benefits
- Insurance coverage including primary rental car coverage
- Enhanced 3X earning for travel & dining spend
- Account maintenance
Under the previous pricing model Chase had $130 from the annual fee to cover all the side expenses plus a cut of the merchant transaction fee of the infinite card. That’s not a lot. In fact it’s very little and I dare to say they make more money on a vanilla Sapphire Preferred card for $95 annual fee.
Back in the day, analysts at Sanford C. Bernstein & Co. estimated in 2016 that the bank wouldn’t break even on its investment in the card for more than five years.
The new benefits (Lyft Pink & DoorDash) on the Sapphire Reserve are live now for those already holding the card:
I’m not doing a 180 on my initial opinion that the new benefits aren’t worth the extra $100 especially if you’re not in the position to use any of them.
What I suggest is to take apart all of the the card benefits and assign a personal value to each of them, then see if it’s worth to keep it or not. After all: It’s business, not personal!
Is the new increased fee of $550 per year making a huge difference for Chase? Maybe not depending if the partnerships with Lyft and Doordash are costing them more than a couple bucks. The real benefit for Chase might be a calculated “weeding out” of customers who think $550 is too much and who don’t generate income for the bank, read: don’t keep a balance.
I’m still firm in my plan to downgrade the card coming June unless there will be some substantial reason than changes my mind. In any case you should have the new alternative premium card ready and approved before initiating a downgrade or cancellation.