Why Has A Credit Card That Costs $450 a Year Gone Viral?
The youngs have gone wild for a new offering that rewards them for using apps they’re already obsessed with
“‘It’s the best time in years to shop for a rewards card,’” an analyst tells the New York Times, and the fact that so many people are clamoring for the new Chase Sapphire seems to be bearing him out.
Premium credit cards that cost users hundreds of dollars each year are nothing new. Why are consumers, especially the Millennials who are reported to loathe and distrust credit cards, acting like Chase has brought One Direction back together? Because Sapphire offers triple points for doing shit they were going to do anyway, like using Uber and AirBnB.
Chase defines “travel” fairly flexibly, and includes services like Airbnb and Uber. Sapphire Reserve customers have spent $1.5 million already with those two companies, earning 4.5 million points, Ms. Bonitatibus said.
Users can then cash in those points for more travel and dining.
“Rewards cards made travel a reality for me,” [one user] said. “I went from seeing Niagara Falls and calling that my international travel to visiting four different countries.” Her points have paid for airfare to Argentina and hotels in Paris; she plans to use her Chase card on a trip to Japan this year.
Ben Schlappig, 26, a travel blogger who lives the life of an upscale-travel nomad — he has no fixed address, preferring to live in hotel rooms — plans to shift most of his spending to his Chase Sapphire Reserve. The card offers triple points on dining and travel spending, the two categories that consume nearly all of Mr. Schlappig’s budget.
The growing popularity of cards that are high-fee, high-reward — some of which are far more expensive, even, than $450 a year — is probably both a function of, and a driving force behind, our newly strengthened economy. If you’re going to spend anyway, spend and earn, right?
Customers seem increasingly willing to consider shifting from free cards to ones with fees and better perks. Americans received 1.2 billion direct-mail credit card solicitations in the second quarter of this year, according to research by Mintel Comperemedia. A record proportion of them, 19 percent, were for fee-carrying rewards cards, up from 14 percent a year ago.
As perks come and go, so do some excited consumers, who make card-hopping a pastime. Younger generations have less instinctive loyalty than their parents had and don’t mind switching up their cards as often as they slide into a new pair of shoes. But as CreditSesame reminds us, there are drawbacks to that.
you’ll probably pay a fee of about 3% of the amount of each balance transfer to transfer each balance. Also, some cards treat balance transfers as cash advances, which are normally billed at an even higher interest rate. So be careful. Acquaint yourself with the terms before you move balances around.
BankRate points out that swapping can also affect your credit.
anytime you ask for something, like a credit-line increase or a new account, the issuer does a hard inquiry. And that can lower your score.
There are drawbacks to the merchants who must accept premium cards, too: they have to pay higher fees, and they often pass those costs onto consumers in the form of higher prices.
But the most important drawback might be that rewards and premium cards incentivize spending, both on the kind of quotidian purchases that generate points — “Uber or subway? I’ll get triple points if I Uber!” — as well as the Instagram-worthy trips on which card-holders can use the points. Maybe you get to Cannes for free, but once you’re there, you’ve still got to pay for the croissants and the club drugs, right? If you budgeted for that, you’re set, but many people get lured into taking a much more YOLO approach: charge in haste, repent at leisure. Premium cards make it easy for consumers, particularly less experienced ones, to get in over their heads — and they have you pay for the privilege.
Schlappig exults that the perks make the new Sapphire “too good to be true.” Buddy, remember, the house always wins.
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