That’s the subtext behind JPMorgan Chase’s big news this week about its premium credit card, the Sapphire Reserve. The new orbital annual fee will increase to $795. This is a 45% hike over its prior fee, the biggest increase since the card was first introduced in 2016. The financial institution aims to retain affluent customers despite the heightened cost by introducing a suite of new benefits and perks that enhance the card’s appeal.
The bank is betting that these major improvements will help keep the Sapphire Reserve competitive. Luxury credit cards are becoming increasingly popular, and they don’t want to lose market share. Perhaps the most thrilling change is the addition of a brand new redemption program. It offers to double the value of your points when redeemed for certain travel purchases — yes, please! This new program is intentionally aimed at the most active, most frequent travelers that value earning and maximizing their rewards above all else.
Beyond this boosted redemption program JPMorgan Chase is introducing a number of other appealing features. As it stands now, new Cardholders have access to a whopping $500 annual credit! Redeem it to pamper yourself at our handpicked array of sumptuous hotels and resorts. Not to mention, you have up to a $300 annual dining credit. Use it for takeout or delivery orders at restaurants in the Sapphire Reserve Exclusive Tables network!
Plus, enjoy a amazing $300 credit to use on ticket buys coming from StubHub. In addition, receive a year of Apple TV+ and Apple Music on us — a combined annual value of about $250! Combined, these new offerings are designed to create an attractive bundle that makes the case for the increased annual package fee.
Clients who spend a minimum of $75,000 annually on their Sapphire Reserve card gain access to fancy advantages. Among these benefits are getting increased top-tier status with Southwest Airlines and IHG Hotels and Resorts. This tiered rewards system incentivizes customers to spend more and hopes to darling their customers.
Misleading or not, JPMorgan Chase does want you to believe that the Sapphire Reserve plastic provides sweeping value and benefits. They believe these benefits far outweigh the new $795 annual fee. When we spoke to industry analysts, they questioned whether there is enough room with such high fees for all the potential future cardholders.
“These high-rate cards are not for everyone, that’s for sure.” – Sanjay Sakhrani
Sanjay Sakhrani noted that while the new perks may attract affluent customers, they raise questions about accessibility for a broader audience. A lot of consumers would be forced to rethink their spending if they faced that much additional cost to keep their premium cards.
Ted Rossman, a senior industry analyst at Bankrate and Creditcards.com, said the space for premium credit cards is changing with the times. He pointed out that while these cards are increasingly moving towards luxury offerings, “I wonder if the $800 fees are becoming too much for some to stomach.” This significant impact, combined with continued concentration of the supply chain, leads analysts to be more concerned for the premium product’s affordability. That concern emerges in an economic climate defined by increasing costs.
“When the Sapphire Reserve first came out, it was a solid middle-class play that offered champagne travel on a beer budget.” – Ted Rossman
JPMorgan Chase is leading the way with these changes. Next, we need to see how current customers will respond and if new applicants will flock to the Sapphire Reserve card. The bank’s strategy is meant to generate a “flywheel” effect. This strategy increases transactional behavior and increases activity within its financial ecosystem, which further creates a customer loyalty loop.
“They feel that it creates a flywheel around keeping people engaged and spending in the system.” – Sanjay Sakhrani