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Some major credit card issuers are offering new perks that are different from the kinds of benefits that many have come to expect from rewards credit cards.
In the past few weeks, American Express made a move to expand its airport lounge access for cardholders, Visa announced exclusive benefits for cardholders at a New York attraction and Chase partnered with a hospitality brand to start offering Sapphire cardmembers extra benefits.
So what’s the deal? It’s not just that credit card issuers are competing harder for your business, some industry experts say — it’s a move to offer rewards that are easier on their balance sheets than things like cash-back bonuses and airline miles.
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Three major card issuers recently took action to bring new perks to cardholders.
- American Express announced plans to acquire the travel lounge company LoungeBuddy, which might enable American Express cardholders to have greater access to airport lounges worldwide.
- Visa partnered with the new Hudson Yards development in New York City to provide Visa cardholders exclusive perks when they use their cards to pay Hudson Yards merchants. Perks range from free admission to The Vessel installation to a secret menu item at a Hudson Yards restaurant.
- Chase partnered with sbe, a global hospitality company, to provide Chase Sapphire Reserve® cardholders with perks at select sbe properties like SLS, Delano, Mondrian and Hyde hotels. Perks at these properties could include getting a fourth night free after four consecutive nights booked, room upgrades, or food and drink credits. Chase Sapphire Preferred® and Chase Sapphire Reserve® cardholders could also see perks like access to exclusive sbe events.
Rewards credit cards — think cards that come with sign-up bonuses, cash back offerings and airline miles — have been popular with consumers, but they haven’t necessarily benefitted card issuers over the long term.
According to a report in The Wall Street Journal, credit card issuers have noticed that consumers often open new rewards cards for the sign-up bonus but stop using the cards after that. Other cardholders may continue to use the cards but regularly pay off their balances on time and in full to earn rewards but avoid interest. This aspect of credit card rewards has gotten costly for many card issuers.
It stands to reason that card issuers could be aiming to entice more credit card use by offering new and different kinds of perks that could be much less costly — helping the card companies’ bottom lines, sources told the Journal.
We think so.
The race among card issuers to attract new cardholders and encourage more credit card use is unlikely to cool off any time soon. There’s still a big market to tap — U.S. credit card debt hit a record $870 billion at the end of 2018, a signal of just how popular credit cards continue to be with many Americans. And tech companies like Uber and Apple are bringing even more competition to the landscape with card products geared toward digital-first consumers.
Tweaking their perks is one way for credit card issuers to generate consumer interest in a way that could better protect their profit margins.