Chase Sapphire Lounge is located at Lagardia Airport. Only Sapphire Reserve customers are accessible.
Benji Stawski / CNBC
JPMorgan Chase bets that a long list of new perks will make wealthy Americans hooked on their sapphire reserve cards despite a huge clash in annual fees.
The bank announced a premium credit card update on Tuesday. This is a 45% jump from previous levels, and the biggest price increase for card issuers Sapphire since its launch in 2016.
However, users now earn more than $2,700 a year when the updated card was released on June 23rd. This includes most of the previous perks, tied to the way customers earn and spend points on travel and meals.
For example, banks are promoting a new redemption program that doubles the value of the points used for selected travel offers and a new redemption program that doubles the $500 new credits in hotel and resort collections.
Additionally, restaurants that are part of the Sapphire Reserve Exclusive Tables Network will have a new $300 dining credit, a $300 credit for purchases on StubHub or Viagogo, and a free subscription to Apple TV+ and Apple Music worth $250 per year.
Customers who spend at least $75,000 a year on their cards, including top tier status at Southwest Airlines and IHG Hotels and Resorts.
JPMorgan has also introduced a new Sapphire Reserve business card with similar annual fees and similar perks as the Consumer Card, along with Ziprecruiter and Google Workspace credits. It legitimately places the bank straight against American Express, which has had a business version of comparable platinum cards for decades.
High-class ambition
JPMorgan, the largest US bank by assets, shook the card industry with the launch of Sapphire Reserve almost a decade ago. Bank Cribbed from the Playbook, founded by Amex, bundled perks around travel and dining, and later opened a network of luxury airport lounges.
However, JPMorgan has introduced premium cards with signature bonuses and credits. The bonuses and credits became financially simpler, forcing other issuers to increase card offers accordingly.
With JPMorgan heading towards the luxury market with Sapphire Aliserve now, banks risk alienating customers who choose to downgrade Amex or Capital One’s Sapphire priority cards or offerings, said Bankrate analyst Ted Rossman.
“When Sapphire Reserve first appeared, it was a solid middle class play that offered champagne trips on a beer budget,” Rothman said. “These premium cards are more luxurious. I think the $800 fee is getting too big in your stomach.”
According to Rothman, that could be due to design. Amex and Capital One had to curb access to the airport lounge due to overcrowding. Some users complain that premium cards aren’t special anymore.
Whether cards like the Sapphire Reserve still make sense at $795 annual fees depends on whether customers take advantage of enough new perks, Rothman said.
Chase Sapphire Reserve Card.
Courtesy: JP Morgan Chase
Later this year, Amex will introduce Platinum card updates. This currently has an annual fee of $695. Amex is also likely to increase annual fees while adding more perks, Rossman said.
“These luxury cards aren’t for everyone. That’s certainly true,” said KBW analyst Sanjay Sahurani.
However, he said Amex and JPMorgan are pursuing a subscription-type business model in which the growing levels of perks give attractive value propositions to certain customers.
“They feel they create a flywheel around people working in the system and maintaining their spending,” Sahurani said. “Even $800 annual fees are not what anyone thinks can offer the range of perks you put on those cards.”
