Interest Rates Up, Credit Card Features Down: Rewards at Risk?

Credit Cards

Mercator maintains a position that ultra-high reward programs are not sustainable.  The market experienced Chase Sapphire slashing their 100,000 reward enticer in half. American Express followed.

Today, Marketwatch covers the elimination of price protection as a product feature.

  • Chase’s Sapphire Reserve card just got a little less generous.

  • Chase JPM, +2.40%  is no longer offering price protection as a perk on its Sapphire Reserve card, the company announced earlier this month. That perk — which allows cardholders to be reimbursed for purchases they make, if the item can be found for cheaper at a different retailer — will no longer be offered, starting Aug. 26, 2018.

It is hard to deny.  Cards are still successful products but profitability is falling.  Will this be a death by a thousand cuts or will we see a big bang where a well-designed card product meets today’s market? Low fee, low features, full network access.

  • Chase’s response: “We’re always evaluating our products to provide the most rewarding and useful benefits to our customers,” the company’s support staff wrote on Twitter. (Chase did not immediately return MarketWatch’s request for comment.)

  • Chase isn’t the first issuer to roll back perks after offering them initially. Earlier this year, Discover DFS, +1.92%  discontinued five benefits for all of its cards, including extended product warranty, return guarantee, purchase protection, auto rental insuranceand flight accident insurance. (Discover did not immediately return MarketWatch’s request for comment.)

What will we see next? Other issuers trimming down card features?  Will Rewards be next?

Credit cards are commodity products; a Chase card does not authorize faster than a Bank of America card.  Both must follow industry requirements.  Features differentiate products, but if margins get slim, anticipate further commoditization.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group