JP Morgan Chase announced an $8.32 billion profit in its second-quarter earnings call on Friday, July 14, 2018. But it’s not the record profit that has everyone in the credit card world talking.
For us, the big news of the earnings call was the $330 million loss incurred from customers redeeming their credit card points. It seems the bank had underestimated how fast and how well savvy credit card users would maximize their points.
It’s a bit surprising that JP Morgan Chase didn’t anticipate this, given it was just in the third quarter of 2016 when the launch of the Chase Sapphire Reserve℠ cost the bank an unexpected $300 million. This 2016 loss was mainly attributed to the higher-than-expected response to the card’s generous 100,000 Ultimate Rewards® points sign-up bonus, plus customers taking full advantage of triple points earned under dining and travel categories and a $300 annual travel credit.
While JP Morgan Chase has since slashed its sign-up bonus to 50,000 Ultimate Rewards points for the Chase Sapphire Reserve, it has retained the triple points earning structure for dining and travel as well as the $300 annual credit. In addition, it has upped the sign-up bonus for the Chase Sapphire Preferred® to as high as 80,000 Ultimate Rewards points in recent months.
Last year, several other premium credit cards took a cue from Chase’s 2016 losses and ended their massive sign-up bonuses in favor of pushing enhanced benefits for long-term cardholders.
Citi Prestige® Card, which offered a 75,000 ThankYou® point sign-up bonus in 2017, has not provided a sign-up bonus to date in 2018. Luxury cards—Mastercard® Black Card™, Mastercard® Gold Card™, and Mastercard® Titanium Card™—ended their sign-up bonuses in 2016. And The Platinum Card® from American Express lowered its sign-up bonus in 2018 (and increased its annual fee to $550).