topic Re: Are the chase freedom cards sustainable? in Credit Cards

Are the chase freedom cards sustainable?

rgd51 — Fri, 07 Jan 2022 09:39:08 GMT

I do sometimes worry if the chase freedom flex and unlimited are sustainable long term due to how high the rewards rates are as well as having no annual fee. From what little I know about interchange rates they are around 2% usually but these cards have 5% and 3% categories that I'm sure lots of people max out and lots of people that PIF (especially since you need good credit to get those cards and people with good credit usually PIF). It makes me wonder if they will have to nerf the cards to remain profitable?

I can see how citi makes a profit on the DC since world elite mastercard interchange rates are over 2% (not by much so people who PIF wouldn't generate a huge profit for citi but still a small profit on each account nonetheless) but with chase having such high paying bonus categories (boosted even higher with the $95 AF sapphire preferred) it is harder for me to see how each account is profitable to them? Maybe I am missing something? I can see how Amex would make a huge profit from a card like the cash magnet that pays 1.5% on all purchases but Amex interchange fees are like double that but for chase I have trouble seeing it.

Re: Are the chase freedom cards sustainable?

ptatohed — Fri, 07 Jan 2022 10:04:54 GMT

@rgd51 wrote:
I do sometimes worry if the chase freedom flex and unlimited are sustainable long term due to how high the rewards rates are as well as having no annual fee. From what little I know about interchange rates they are around 2% usually but these cards have 5% and 3% categories that I'm sure lots of people max out and lots of people that PIF (especially since you need good credit to get those cards and people with good credit usually PIF). It makes me wonder if they will have to nerf the cards to remain profitable?

I can see how citi makes a profit on the DC since world elite mastercard interchange rates are over 2% (not by much so people who PIF wouldn't generate a huge profit for citi but still a small profit on each account nonetheless) but with chase having such high paying bonus categories (boosted even higher with the $95 AF sapphire preferred) it is harder for me to see how each account is profitable to them? Maybe I am missing something? I can see how Amex would make a huge profit from a card like the cash magnet that pays 1.5% on all purchases but Amex interchange fees are like double that but for chase I have trouble seeing it.

Don't worry about it. Act today as if they will be here tomorrow and for the long run, but be prepared if they change terms. Chase Freedom (I have the OG) has been around for many years. So has Discover-it 5% rotating. Enjoy the 5% CB and don't let it worry you. No one has a crystal ball but I think they will be here for the foreseeable future.

Re: Are the chase freedom cards sustainable?

Hoben02 — Fri, 07 Jan 2022 11:11:19 GMT

They make a large part of their money from people who cannot pay their balances in full, late fees, card annual fees, balance transfer fees etc.

Re: Are the chase freedom cards sustainable?

EAJuggalo — Fri, 07 Jan 2022 11:18:32 GMT

If membership here reflected the general population they might be in trouble, but most of us here are on the fringe of society when it comes to credit. There is another thread here of a member who for 15 years used their Freedom for everything, so the vast majority of that was 1%. I think the CSR goes long before the CFF or CFU.

Re: Are the chase freedom cards sustainable?

Lou-natic — Fri, 07 Jan 2022 11:46:32 GMT

Chase is a huge bank but also really conservative. If they didn't think they could sustain it I doubt they would have brought them to market at all.

Re: Are the chase freedom cards sustainable?

Brian_Earl_Spilner — Fri, 07 Jan 2022 12:47:28 GMT

You're making some assumptions that you shouldn't. I can assure you that the majority of cardholder's don't max out categories and pif. Banks are out to make money and they don't put products out on a whim. Enough research has gone into it that it was deemed sustainable for as long as they projected for.

Re: Are the chase freedom cards sustainable?

AverageJoesCredit — Fri, 07 Jan 2022 13:28:24 GMT

@Lou-natic wrote:
Chase is a huge bank but also really conservative. If they didn't think they could sustain it I doubt they would have brought them to market at all.

Dont tell that to Amazon Visa card holders. Chase went all Sync on everyone recently.

Re: Are the chase freedom cards sustainable?

coldfusion — Fri, 07 Jan 2022 13:47:23 GMT

Almost exactly 50% of cardholders regularly carry balances. The interest they pay funds the cashback and other rewards that the other 50% enjoy.

Re: Are the chase freedom cards sustainable?

Remedios — Fri, 07 Jan 2022 15:25:26 GMT

Well, the real life percentage of people who pay in full is still under 35%

Here is 999%

Re: Are the chase freedom cards sustainable?

sarge12 — Fri, 07 Jan 2022 15:27:45 GMT

@rgd51 wrote:
I do sometimes worry if the chase freedom flex and unlimited are sustainable long term due to how high the rewards rates are as well as having no annual fee. From what little I know about interchange rates they are around 2% usually but these cards have 5% and 3% categories that I'm sure lots of people max out and lots of people that PIF (especially since you need good credit to get those cards and people with good credit usually PIF). It makes me wonder if they will have to nerf the cards to remain profitable?

I can see how citi makes a profit on the DC since world elite mastercard interchange rates are over 2% (not by much so people who PIF wouldn't generate a huge profit for citi but still a small profit on each account nonetheless) but with chase having such high paying bonus categories (boosted even higher with the $95 AF sapphire preferred) it is harder for me to see how each account is profitable to them? Maybe I am missing something? I can see how Amex would make a huge profit from a card like the cash magnet that pays 1.5% on all purchases but Amex interchange fees are like double that but for chase I have trouble seeing it.

I think you err in thinking that people with high credit scores usually PIF...some do, but many do not. Many view paying interest as an expense they are willing to pay. Those with poor credit often PIF while using AZEO in order to raise their scores. Also, the premium cards with higher rewards charge vendors higher swipe fees. Vendors know that these card holders tend to spend more, so they accept the higher swipe fees. High credit scores, has very little to do with whether a cardholder will be a transactor, a revolver, or a little of both. What high scores do indicate, is these cardholders are very unlikely to default on their debts. With the higher swipe fees, and lower default rates, it is easy to make up for the added cost of perks on these premium cards.

Re: Are the chase freedom cards sustainable?

Anonymous — Fri, 07 Jan 2022 15:42:39 GMT

@rgd51 wrote:
I do sometimes worry if the chase freedom flex and unlimited are sustainable long term due to how high the rewards rates are as well as having no annual fee. From what little I know about interchange rates they are around 2% usually but these cards have 5% and 3% categories that I'm sure lots of people max out and lots of people that PIF (especially since you need good credit to get those cards and people with good credit usually PIF). It makes me wonder if they will have to nerf the cards to remain profitable?

I can see how citi makes a profit on the DC since world elite mastercard interchange rates are over 2% (not by much so people who PIF wouldn't generate a huge profit for citi but still a small profit on each account nonetheless) but with chase having such high paying bonus categories (boosted even higher with the $95 AF sapphire preferred) it is harder for me to see how each account is profitable to them? Maybe I am missing something? I can see how Amex would make a huge profit from a card like the cash magnet that pays 1.5% on all purchases but Amex interchange fees are like double that but for chase I have trouble seeing it.

Others have answered the question (basically MyFico isn't typical, others do not always PIF or use different cards to maximize each transaction) but on the other side, the issuing bank pays all the rewards but doesn't get all the transaction fee, that is shared with the network and any 3rd party processor(s) among others. So even a 2.2% interchange rate doesn't mean a bank could safely offer 2% rewards if everyone paid in full every time.

Re: Are the chase freedom cards sustainable?

simplynoir — Fri, 07 Jan 2022 15:52:25 GMT

@sarge12 wrote:
I think you err in thinking that people with high credit scores usually PIF...some do, but many do not. Many view paying interest as an expense they are willing to pay. Those with poor credit often PIF while using AZEO in order to raise their scores. Also, the premium cards with higher rewards charge vendors higher swipe fees. Vendors know that these card holders tend to spend more, so they accept the higher swipe fees. High credit scores, has very little to do with whether a cardholder will be a transactor, a revolver, or a little of both. What high scores do indicate, is these cardholders are very unlikely to default on their debts. With the higher swipe fees, and lower default rates, it is easy to make up for the added cost of perks on these premium cards.

This also makes the assumption people who hold the high AF cards maximize everything on those cards to make up the difference. Some just eat the AF to say they have the card, credits such as the one on the AMEX Platinum cards for example make it hard to use or it's niche enough where it might not be used period, some even pay the AF bill but don't use the card, or simply because it's metal. AF cards are a big business

As others have already said credit card companies are here to make a profit and with the exception of some obvious cards that were doomed to eventually die out (Uber card from Barclays comes to mind) they are in this for the long haul

Re: Are the chase freedom cards sustainable?

SouthJamaica — Fri, 07 Jan 2022 16:29:53 GMT

According to this article

51% of credit card accounts

carry a balance.

Re: Are the chase freedom cards sustainable?

rgd51 — Fri, 07 Jan 2022 16:59:27 GMT

@SouthJamaica wrote:

According to this article
51% of credit card accounts
carry a balance.

I have seen that statistic before but doesn't that include subprime cards too?

Re: Are the chase freedom cards sustainable?

Ficoproblems247 — Fri, 07 Jan 2022 22:24:11 GMT

@EAJuggalo wrote:
If membership here reflected the general population they might be in trouble, but most of us here are on the fringe of society when it comes to credit. There is another thread here of a member who for 15 years used their Freedom for everything, so the vast majority of that was 1%. I think the CSR goes long before the CFF or CFU.

Agree completely that so many people do not maximize the reward structure. I heard my boss talking about how much cash back he earned with his vanilla Freedom card to another coworker one time, and asked him how he liked that year's 5% cat choices so far. He had ABSOLUTELY NO IDEA that his Freedom card had 5% rotating categories and had been using it as a 1% earner presumably without ever activating them a single time. It blew my mind, but I'm sure there are pleanty of others out there that do the same.

Re: Are the chase freedom cards sustainable?

MrDisco99 — Fri, 07 Jan 2022 22:57:12 GMT

Some of my friends thought I was crazy for having more than one credit card.

Most people out there are not like us. We're weird. We optimize earning categories and have multiple cards to extract as much money from the banks as we can. Most normal people just have one card they use for everything... so tons of 1% earning... and they carry balances. Lots of people forget to activate their quarterly categories... or don't know or care that they have to.

Chase Freedom has been around for how many years now? They're doing fine.

Re: Are the chase freedom cards sustainable?

NRB525 — Sat, 08 Jan 2022 01:24:22 GMT

@MrDisco99 wrote:
Some of my friends thought I was crazy for having more than one credit card.

Most people out there are not like us. We're weird. We optimize earning categories and have multiple cards to extract as much money from the banks as we can. Most normal people just have one card they use for everything... so tons of 1% earning... and they carry balances. Lots of people forget to activate their quarterly categories... or don't know or care that they have to.

Chase Freedom has been around for how many years now? They're doing fine.

Before I started really looking at cards, after joining here about 2014, I was happy with my US Bank basic 1% Card. "Look at the cash back growing! Wow!" Carrying a balance and paying interest on the same card. Of course, the other side of my credit worksheet was large balances where my main focus was on finding the lowest APR, balance transfer max, to try to chew that down and avoid Balance Chasing. I didn't really have space on cards to see rewards. Then I noticed my Freedom OG was still getting 10 points per swipe, 10% extra points, and a bunch of other accelerators, along with the 1% and 5% categories, and started focusing on that little $1,500 limit card, as an example. It also took me a few years to figure out my Cash+ that US Bank forced on me in 2011.

So yeah, I can see where lots of others who are just getting by with their finances are paying fees and interest. But now that's their game and I'm happier to be getting rewards from multiple Chase Freedom account variations. While the banks are paying me rewards, I'm playing the game that way.

Re: Are the chase freedom cards sustainable?

Lou-natic — Sat, 08 Jan 2022 01:40:21 GMT

@MrDisco99 wrote:
Some of my friends thought I was crazy for having more than one credit card.

Most people out there are not like us. We're weird. We optimize earning categories and have multiple cards to extract as much money from the banks as we can. Most normal people just have one card they use for everything... so tons of 1% earning... and they carry balances. Lots of people forget to activate their quarterly categories... or don't know or care that they have to.

Chase Freedom has been around for how many years now? They're doing fine.

This stuff right here is why daily someone on here makes a post saying how amazing this forum is and talks about what new thing they just learned because they didn't know "X/Y/Z" about credit cards or credit in general. EVERY DAY. Learning the basics is easy, and is repeated Ad nauseam in countless articles across the internet, things like staying below 30% utilization or making sure you set up autopay to never miss a minimum payment, stupid stuff like that. What makes this forum so special though is we understand that's just fluff and filler and we strive to know better than that. I had no idea you could "product change" a credit card. NO CLUE. Until I found this forum. The banks sure never told me and in fact they will tell you to "just apply for a new card, it'll only take a minute". It's ridiculous.

Re: Are the chase freedom cards sustainable?

Citylights18 — Sat, 08 Jan 2022 03:35:02 GMT

The travel portal concept (chase travel portal) is hard to get going against cardholders of Hyatt, IHG, Marriott, Hilton etc. where you get so many more points for using your card directly with them than what you get with a travel portal. They've tried to go 10x with hotels it but that is only for the Sapphire Reserve which has a $550 annual fee.

If you have points you won't take advantage of it. Its only if you don't have points or trying to earn an SUB for the Reserve where you might take advantage of it.

The 5x rotators on the CF/CFF I found hard to max out in most circumstances. I did it this past quarter with the CF for the first time. The points come more from drug stores and restaurants for me, unless its a grocery or gas quarter. I am not going to do all my grocery shopping at Wal-Mart because its 5x that quarter.

Re: Are the chase freedom cards sustainable?

Royalbacon — Sat, 08 Jan 2022 04:25:54 GMT

I think your way overestimating the general population and average consumer. The people here are a teeny, tiny miniscule minority.

I tried explaining to a friend how the Cabela's Club card a few years back worked when I had a decent amount of Club points built up and was able to spend it at Cabela's and get some free merchandise, and explained how you get club points when you make purchases. He thought that would cause Cabela's to lose a ton of money. And yet, a few years back according to this article (Back when the card was issued by Cabela's in house bank before it was sold off to Capital One) the Cabela's card brought in more then $430 million worth of revenue for the company, and the average balance that people carried on the card was around $3900. The "free" club points they give out to cardholders, that's a teeny tiny drop in the bucket relative to the insane amount of interest people are paying on the ridiculous balances that they're carrying on the card.

Cabela's credit card business is a cash cow — that's why it might be sold | Money | omaha.com