The premium card space has really heated up in the past few years. Back in the day the Amex Platinum Card basically didn’t have any competitors when it came to high annual fee cards that offered many perks. That has changed, however:
- A few years ago Citi put a lot of effort into the Prestige Card, which had a big sign-up bonus, generous rewards, and a great return on spend
- Then just last year Chase introduced the Sapphire Reserve, which has resonated with millennials; it’s a premium card for people who largely wouldn’t have otherwise considered getting a premium card
While the Sapphire Reserve has a $450 annual fee, it offers triple points on dining and travel, a $300 annual travel credit, the ability to redeem points for 1.5 cents each towards travel purchases, and much more. On top of that, the card had a 100,000 point bonus when it was introduced (now the bonus is 50,000 points upon completing minimum spend).
This card has cost Chase a ton of money in the short term, to the point that they’re pushing for $200 million in cost cuts in the unit that oversees the card. The real telling thing is whether people renew after the first year. Now that more than a year is up since the card was introduced, Chase has reported that they’re pleased with the retention rate for the card.
With Chase introducing this card, both American Express and Citi have modified their premium products. Arguably the changes to the cards haven’t necessarily been positive, though changes have been made:
- On the Platinum Card, Amex raised the annual fee by $100, though also introduced a $200 annual Uber credit, which for many more than offsets it
- On the Prestige Card, Citi no longer offers Admirals Club access with the card, they devalued the fourth night free benefit, they don’t offer three rounds of free golf anymore, and more
While Chase is obviously trying with the Sapphire Reserve, and while I still think the Amex Platinum Card is great, I can’t help but wonder what Citi is thinking with the Prestige Card, as they made it less competitive. Well, it looks like we now have our answer. Reuters has a story about how the Sapphire Reserve has “squeezed” competitors. The following quote is especially telling:
A Citigroup executive said that after JPMorgan’s move Citi changed course and turned its marketing toward no-fee cards that offer free borrowing for as long 21 months instead of travel rewards.
“We shifted our focus away from rewards because of the competitive heat,” Citigroup Chief Financial Officer John Gerspach said in a conference call with reporters after posting quarterly results.
While Citi isn’t discontinuing the Prestige Card, they are shifting their focus away from rewards cards and instead focusing on no-fee cards that have intro 0% financing and don’t offer travel rewards.
Clearly Chase introduced something that has resonated with consumers, and I guess they’re squeezing the competition. It’s sad that Citi can’t — or chooses not to — compete in the premium card space. Personally I’m keeping the Prestige Card as I still value the fourth night free benefit, but I can’t help but be sad that they aren’t trying a bit harder.
Are you surprised to see Citi focusing their efforts away from travel rewards cards?
(Tip of the hat to View from the Wing)