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AMEX feeling the heat

Shep_634
Member

Re: AMEX feeling the heat

I have no idea why about a full paragraph was deleted out of my last post...

While AMEX can't go punch for punch with signup offers, it can do things like introduce new products (Tier 1 rumors certainly got people interested) or revamp old ones like Zync ... certainly run signups in response to others, and actually dump more into marketing... maybe it's just my market (New England) but I rarely see AMEX commercials, but I am inundated with Chase/Citi commercials because they run different commercials literally for every card they have.
Message 51 of 59
TheBrad
Frequent Contributor

Re: AMEX feeling the heat


@Shep_634 wrote:
maybe it's just my market (New England) but I rarely see AMEX commercials, but I am inundated with Chase/Citi commercials because they run different commercials literally for every card they have.

I still see a lot of those Tina Fey Amex commercials. The one I see most often is the one on the plane. I think there's another new one that I just started seeing, but could be wrong. But yeah, Chase and Citi do seem to have a lot more.

Message 52 of 59
yfan
Valued Contributor

Re: AMEX feeling the heat


@Shep_634 wrote:
I would disagree that rewards don't net income in the end, I would say maybe for Chase specifically it might be less if the marketing campaign isn't garnering expected results but between transaction fees, associated fees (lates, annuals, etc), APR rates earned from revolver type consumers, marketing partnerships (i.e. citi/costco), huge gains are able to be made. Hence the fine prints (Disco 5% up to XX.xx in Y category). On the consumer end there is also the "need" to maximize cards, "have to hit 4,000 in 3mo for sign up bonuses" or "have to spend XX to justify Y cost." Most people end up with more transactions than normal. Add into that equation 90% of people aren't savvy enough to maximize reward value... "oh I have enough points to get A gift card for $25.00" and end up burning 5,000 points getting a half cent redemption rate

Interesting observation. I think marketing partnerships are going to be the new wave of competition within the credit card industry rather than bonuses. High end travel cards will continue to offer sizeable bonuses, but after Chase's loss with the CSR, which Amex was almost certainly watching and moved in with a 5X points on airfare alternative on the Platinum as a viable alternative, I don't see many banks taking a big gamble with an outsized bonus.

 

On the other hand, the way Costco made issuers and networks bid was outstanding. Costco went for the thinnest margin on interchange fees possible, which Amex just couldn't do, and Citi/Visa moved in because (a) Citi knew that it would make up the revenue wih people using the card elsewhere even for people who care about categories (the 3% restaurant/travel category is basically unheard of in cards with no (additional) annual fee), and (b) Visa would do so much business with Costco in volume (dang nearly everyone has a Visa card) that it would make up for low swipe rates.

 

None other than Chase is following that trend, too. Hence the upgrade of the Amazon Visa for prime members to 5% and sticking a no FTF to it. Best "bonus" you will get on that card is $70, but the 5% figure makes people want to get/use it.

 

While brand loyalty is on the decline in general in retail, a few brands have bucked the trend: Costco and Amazon are among them, as are Apple, Tesla, etc. Target to a lesser degree which is why the Red card is a success. But for these brands that are successful, people who like these brands like showing off their support. Almost like people like showing off their support of their favorite sports team. I see Costco and Amazon visas being used all the time out in the wild, even - and mostly - in places where using them don't get you a bonus.

 

Bonuses are a way to get people accustomed to using your card all the time. Top branding may be a better way to reach the same end.

Message 53 of 59
yfan
Valued Contributor

Re: AMEX feeling the heat


@gdale6 wrote:

I still read printed material inlcuding newspapers, the local paper isnt even posted online. I saw some comments that banks cannot stay afloat giving 3-5% and I disagree, their earnings reports prove that, they still have hundreds of millions of card holders that earn no rewards at all and others that dont spend on their cards just to get that reward. 


Yes, but what incentive does a bank have to pay those extra rewards to people who don't make them money? Other than a solid AF, only one: they have to cast the net a bit wide and it catches both regular spenders and rewards chasers alike to get those regular folk who make them the money. Only thing is, banks are getting better at figuring out whose profile is more likely to rewards chase, and they are also getting better at finding other ways to make people use their card (like cobranding with popular retail brands such as Costco and Amazon). I'd be very surprised to see a 3%+ card that has no AF and does not require jumping through relationship hoops with the issuers.

Message 54 of 59
cardfan
Regular Contributor

Re: AMEX feeling the heat


@yfan wrote:

@gdale6 wrote:

I still read printed material inlcuding newspapers, the local paper isnt even posted online. I saw some comments that banks cannot stay afloat giving 3-5% and I disagree, their earnings reports prove that, they still have hundreds of millions of card holders that earn no rewards at all and others that dont spend on their cards just to get that reward. 


Yes, but what incentive does a bank have to pay those extra rewards to people who don't make them money? Other than a solid AF, only one: they have to cast the net a bit wide and it catches both regular spenders and rewards chasers alike to get those regular folk who make them the money. Only thing is, banks are getting better at figuring out whose profile is more likely to rewards chase, and they are also getting better at finding other ways to make people use their card (like cobranding with popular retail brands such as Costco and Amazon). I'd be very surprised to see a 3%+ card that has no AF and does not require jumping through relationship hoops with the issuers.


It's important to remember that the banks are starting from a position of earning annual fees a fee on every single transaction, and, if the borrower has particularly good credit and always pays off balances right away, Chase doesn't have to worry about defaults, which are by far the most expensive part of this business.  Moreover, one cardholder who regularly carries a balance is able to offset losses incurred for several cardholders who pay off right away.  What this means is that the banks can create aspirational rewards for the masses and profit off of the people who bite off more than they can chew (which is all the more reason to be responsible with your credit card usage--the banks don't really have an incentive to bail you out, with the possible exception of hoping to avoid a default if reasonably possible).  Signup bonuses often encourage people susceptible to carrying a balance to start carrying one right away.  The rest of the client base serves to market the card (you tell your friends about the awesome vacations you're taking because Chase made it possible, for example).  

 

Additionally, there are other reasons why a bank might want to take a loss on an aspirational card like the CSR, Prestige, or Amex Platinum.  For example, Chase is able to promote its other services to existing cardholders.  Responsible cardholders who pay off their balances on time are exactly the type of people Chase wants to sign up for car loans and mortgages, which have profit structures built right in, and you're more likely to choose a bank with whom you have a good relationship.

 

With respect to Amex, I believe that they're not as bad off as they seem.  Their annual fees are fairly large (the Amex BCP annual fee seems particularly large unless you spend a lot on gas or department stores (since the tier for supermarkets is capped)), their MR points are worth low amounts (if you don't know how to maximize their value--unlike Chase UR points, they don't have a 1 cent value when redeemed for cash), there are hidden fees on certain MR redemptions (for example the fee for transferring MR points to Delta), the client base has historically been less likely to default on its debts (and for the most part this seems to be holding true) and tend to have higher levels of income, Amex keeps a bigger portion of their interchange fees (remember, Chase splits its fees with Visa, whereas Amex does not have a corresponding expense), Amex's most aspirational cards reward those who tend to have more money to spend (the highest tier for earning points on the Platinum and PRG is for flights booked directly with the airline--I personally collect points becasue I don't have the money to afford spending cash on plane tickets on a regular basis), and the list goes on I'm sure.  The only catch is that this business model has an upper growth limit.  Not to get political, but as wealth is consolidated in relativley few people, it leaves less and less room for Amex to grow.  However, in the meantime, Amex's customer base is going to remain profitable for a while.

 

However, I think what Amex has missed about Chase's experience with the CSR and the 100,000 point signup bonus is that the CSR offers features that Millenials expect.  UR points are far more transparent than MR points.  They post faster, you can see which individual transactions qualify for bonus spending, the travel statement credit doesn't come with a mile of red tape, the spending categories are relevant (Milenials take Ubers and dine out far more than their parents, who are the ones making the most use out of grocery store bonus categories), UR points have a more transparent redemption value (UR points are always worth at least 1.5 cents when you have the CSR--you can't really say the same for Amex (unless you have a small business and can get the Business Platinum)), the CSR has a lower effective annual fee because its statement credit for travel is larger, and I'm sure there are even more reasons.  (There are points, however, where I think Amex interacts with Millenias better, but these are not enough.  Amex's mobile app is far better (with the exception that Chase has Chase Quick Pay), and Amex allows credit limit increases that don't require a hard inquiry).

 

In all, I agree, Amex needs to step up its game.  However, I don't agree that the credit card companies can't afford to keep this all going.  The only thing that can bring everything down would be a recession.  At the end of the day, banks can't keep any of this going if its client base is defaulting left and right.  As long as the economy is growing, however, there shouldn't be a problem.

Amex Platinum: NPSL | Amex (Rose) Gold: NPSL | Amex Everyday: $16,500 | Amex SPG: $3,500 | Amex Luxury SPG: $10,000 | Amex Delta Platinum: $5,000 | Chase Sapphire Reserve: $15,000 | Ritz-Carlton: $10,000 | Chase Freedom: $1,500 | Chase Freedom Unlimited: $3,000 | Chase Freedom Visa Signature: $5,900 | Marriott Premier Rewards: $5,100 | Hyatt: $3,000 | 1st Financial: $8,300 | Citi Double Cash: $6,200 | Discover It: $14,200 | Quicksilver: $24,000 | Arrival+: $12,500 | Citi Best Buy: $8,000 | Costco Visa: $8,500 | Apple Card: $7,500
Message 55 of 59
yfan
Valued Contributor

Re: AMEX feeling the heat


@cardfan wrote:

It's important to remember that the banks are starting from a position of earning annual fees a fee on every single transaction, and, if the borrower has particularly good credit and always pays off balances right away, Chase doesn't have to worry about defaults, which are by far the most expensive part of this business.  Moreover, one cardholder who regularly carries a balance is able to offset losses incurred for several cardholders who pay off right away.  What this means is that the banks can create aspirational rewards for the masses and profit off of the people who bite off more than they can chew 


In other words, high rewards, high bonus products exist in part because a sucker is born every minute. Okay, that may be too crass a statement, but essentially, you are saying that banks count on - even depend on - the fact that a ton of their users will get themselve into debt trying to "aspire" to rewards. And that's true. That happens. We see examples of it here often. That was also partly my point about casting a wide net. The only other thing I'm saying is that while it's more profitable for a bank on the net to get both the rewards chasers and churners as well as the interest payers in order to get enough interest payers to far outweigh chasers, that doesn't mean that they won't continue to improve their systems to weed out chasers. Chase's 5/24 is such a system. Amex's one-time-bonus-per-person is an even stronger version of it. 

 


@cardfan wrote:

 

Additionally, there are other reasons why a bank might want to take a loss on an aspirational card like the CSR, Prestige, or Amex Platinum.  For example, Chase is able to promote its other services to existing cardholders.  Responsible cardholders who pay off their balances on time are exactly the type of people Chase wants to sign up for car loans and mortgages, which have profit structures built right in, and you're more likely to choose a bank with whom you have a good relationship.


Absolutely correct. I agree that a bank wants to build customer loyalty and card products can be part of that strategy. Only problem is, bonus chasers are loyal to the bonuses, not the bank. So the bank has nothing to lose by weeding them out and selecting people who will actually be loyal to their products. If they can't get that, they will go after what people are loyal to - like strong retail partners such as Costco and Amazon.

Message 56 of 59
PapasChileHuevos
Regular Contributor

Re: AMEX feeling the heat

A little over a month into my first AMEX experience, and I have to say I just find this card a little annoying. That there's a thread devoted to complaining about the Citi DC seems really odd in comparison. Only being able to redeem in $25 increments and only being able to redeem in statement credit are both pretty annoying (I really prefer cash back). Also, for some reason, AMEX really seems to not want me to pull payments. Pushing them isn't too big of a deal, but I prefer to pull, and every other card makes that option easy.

 

Citi, Chase, and Discover so far, are just a better experience for me. Easy to use, pay, and redeem without a hitch. Outside of the bonus, I don't see myself using the AMEX very much long-term.

 

I don't know if others find it annoying, and I'm sure that wouldn't have much to do with why they may be struggling at the moment. Surely, it wouldn't help though.

CapOne Secured ($500), Discover It ($1600), BOA Cash Rewards Secured ($500), Amazon Store Card ($2700), Chase Freedom ($6000), Citi DC ($3200), AMEX BCE ($3000), Chase Amazon Visa ($2000)
Message 57 of 59
kdm31091
Super Contributor

Re: AMEX feeling the heat


@cardfan wrote:
They post faster, you can see which individual transactions qualify for bonus spending, the travel statement credit doesn't come with a mile of red tape, the spending categories are relevant (Milenials take Ubers and dine out far more than their parents, who are the ones making the most use out of grocery store bonus categories), UR points have a more transparent redemption value (UR points are always worth at least 1.5 cents when you have the CSR--you can't really say the same for Amex (unless you have a small business and can get the Business Platinum)), the CSR has a lower effective annual fee because its statement credit for travel is larger, and I'm sure there are even more reasons

 

While this is true, I just can't help thinking most  people don't pay attention to their points per transaction nor even know how to look at this information whether it's available or not. I think most people just use the card, pay the bill, and use the points when they're awarded. They may be attracted to the bonus categories on a card but I doubt they spend much time making sure they're getting the points for each transaction. Most people just don't expend the effort on these things IMO.

 

However, despite my belief that relatively few people care, Amex should improve its reward system and the clunkiness of it.

Message 58 of 59
longtimelurker
Mega Contributor

Re: AMEX feeling the heat


@PapasChileHuevos wrote:

A little over a month into my first AMEX experience, and I have to say I just find this card a little annoying. That there's a thread devoted to complaining about the Citi DC seems really odd in comparison. Only being able to redeem in $25 increments and only being able to redeem in statement credit are both pretty annoying (I really prefer cash back). Also, for some reason, AMEX really seems to not want me to pull payments. Pushing them isn't too big of a deal, but I prefer to pull, and every other card makes that option easy.

 

Citi, Chase, and Discover so far, are just a better experience for me. Easy to use, pay, and redeem without a hitch. Outside of the bonus, I don't see myself using the AMEX very much long-term.

 

I don't know if others find it annoying, and I'm sure that wouldn't have much to do with why they may be struggling at the moment. Surely, it wouldn't help though.


Well, a number of us do complain about this quite a lot!   The extra month delay and the $25 increments make things very clunky and is obviously purely to benefit Amex  (I'm often left with about $15 in rewards I cannot redeem till the next month).   I agree DC looks good in compariosn.

Message 59 of 59
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