pzpa

https://www.bloomberg.com/news/artic...ion-in-quarter

I doubt we'll see the current sign-up going on forever. I wonder what changes they'll make going forward.

mymilesandpoints

Would be interesting to see in the 10Q filing how Chase accounts for these "acquisition" costs. Wonder if they will put it in deferred costs first in OCI or some contra account, and then slowly bleed it into actual P&L as people use the 100K sign up bonus (since it will cost Chase different amounts depending on how customers redeem the points).

One very rough estimate using this datapoint can be arrived through this:

1) assume 100K UR sign up bonus is the acquisition cost
2) the 100K UR points given to customers to acquire them can be redeemed at minimum 1 cent per UR point and at max 1.5 cents through the travel portal.
3) that gives us an approximate acquisition cost of $1,000 to $1,500 per customer.
4) given Dimon said they plan to recognize 200-300m in 4Q, that could mean they acquired $200mn/$1,000 = 200,000 new sapphire reserve card members, or done another way $300m/$1,500 gives you the same 200,000 new cards.

A couple interesting observations here. Is this 200k new card sign ups a record? Have there been a faster sign up rate in just 3 months of release. Throw in the fact that they spent no marketing dollars on this new card - this sounded like a massive win for Chase by a margin.

By comparison, some estimate AMEX Platinum and Centurion members to be 1.3 million in total in 2015 (based on rough estimate on the number of member magazines in circulation that comes with AMEX plat and black). For chase to be at 15% of AMEX's historical target clientele should send shockwaves down AMEX's spine.

Just my 2cents worth. Now back to work. Sigh.

CodeAdam10

Acquisition costs are likely much higher than $1,500

StartinSanDiego

That was interesting. Thanks for the link. I went further and listened to this one, "The Cult of the Chase Sapphire Reserve Card," about half way down the page: https://www.bloomberg.com/news/artic...edit-card-king

About 1:34 seconds in, comes the graphic "Credit Card Churning 101." Her response is that Chase is not looking for "serial starters" who love 'em and leave 'em, but rather targeting those long term "high spender" customers for a premium product.

krazykanuck

The real question of course is how many people who signed up for the CSR will actually stay past the first year, and that's really anybody's guess until Q4 next year. The only people I've met in real life that got the CSR were friends of a friend I happened to be at happy hour with and the two of them, a girl and her boyfriend, both said they planned to redeem for cash back and cancel the card

I think a really large portion of the signups were driven by the 100k bonus and when the prospect of paying another $450 AF rolls along, many people will walk away, especially since you can keep the UR points indefinitely if you downgrade the card, it's not like Citi where they'll disappear after you cancel.

mymilesandpoints

i'm sure there will be some segment of the population that will end up cancelling, but a significant portion of my office went gaga about the card for over a month, with even senior folks in the office applying for their first credit card in years and replacing their 20yr amex plats with the CSR as their default card. i'm really excited to see AMEX's numbers in the next couple years to see how the introduction of citi prestige, CSR, and the loss of costco and other co-branded deals (SPG probably pending) will hurt them...

stockmanjr

I'm not so sure. The card at $150 net after the travel credit is a pretty good deal as for $55 over CSP you get some lounge acccess and 1.5x on airline redemptions.
Cheers
Howie

krazykanuck

I don't disagree with you! I plan to keep my CSR to transfer to partners and the 1.5 cpp travel portal. But many people aren't rational and see a $450 fee and may freak. Or they figure it's not worth the cost. Even on reddit thats focused on credit cards, there are many people who got the card and are like "I don't really travel, how do I cash out the $300 credit"

I have a healthy 6 figure UR balance, so it's worth it to me to keep the partner transfer and 1.5 redemptions available. Also travel and dining is probably most of my organic spending anyway, so it's a good fit for my spend habits. Also I can book all of my work travel on my personal card so that's just free points. I'm also one of the people that keeps the Amex Plat next to the CSR, because while at first blush they seem like substitutes, IMO they aren't.

bbriscoe34

That may be their target, but I don't see the downside in churning this one. 100,000 pts less $450 in fees still leaves you with 55,000 pts if you pay the fee with your points, which is still more points than the CSP gives you. Add in the $300 travel credit, which can be used twice in 2 calendar years for a single annual fee, and you come out way ahead even if you are a typical no fee churner. If you have a significant other, you can take turns holding this card and keep earning the bonus to cover the fee (and then some) each year.

Since I need to renew my Global Entry next March I think I will be doing this one as soon as I meet the spend requirments on my Chase Ink Preferred that I just got.

StartinSanDiego

I'd completely agree with you, and agree that the benefits are tremedously appealing to all, including churners, except I don't think you can realistically churn this card or most of the Chase menu of cards. At least under the historic definition of "churn." The axe has fallen at Chase on churners already, with the 5/24 rule. Whether you define "churn" as repeated opening and closing the same card, or as opening and closing lots of cards on a regular basis, the options are drying up. Chase clearly doesn't want the "serial signers," (why would they???), have isolated, defined, and even named, what constitutes churning behavior, and come up with a plan (5/24) to thwart it.

You and your wife could, indeed, alternate cardholdership every other year, reap the benefits of the double dip for the travel credit, and come out ahead. As long as you wait the required 24 months since you last received a bonus, don't run afoul of the 5/24 rule, and if Chase doesn't tighten the rules in the meantime, that is a workable plan. But, that seems like a lot of variables to me. I'm keeping my card, and we're keeping my spouses card, because the $300 travel credit and lounge access are enough to justify what works out to be a $150 fee.

mia

Not really. Chase built their credit card business through acquisition, and it really shows in this product. Chase does a good job on rewards, and on insurance (which is outsourced), but they have flubbed Priority Pass by outsourcing the administration, and there is little else. They apparently don't have the relationships or knowledge to build emotional hooks into a product.

They must spend more money on this card by mid year to avert a huge wave of cancellations next Autumn. This means offering more benefits to existing cardholders with no incremental revenue from those accounts. They need to create the impression of an product that is evolving, offering increasing value over time. If they've only placed a couple hundred thousand cards they face the same problem that Citi has not been able to overcome - they won't have the scale to make the cost per account low, and if they pull back it's over.

StartinSanDiego

I would think that Chase can't really up the ante on a card that they gave out 100K points and $300 or more in cash.

You don't think that the 3x on travel and dining will keep the frequent flier or business traveler? My impression is that the younger cardholders, such as millennials, have high spend in the dining category. Granted, though, it would take a lot of dining to offset the yearly fee, if one didn't maximize the travel reimbursement.

krazykanuck

Right, but the 100k is just a sign up bonus. Once it hits, it becomes irrelevant to the renewal decision. When I make a keep/cancel decision, I don't care what the sign up incentive was, and I'd bet many people feel the same.

Also for many of us (at least on FT) that have so many CCs in our portfolio, it becomes a question of what is the differentiated value to each card. The issue with the CSR is that the only features it has that differ from my other "premium" cards is primary car rental insurance, and favorable earnings on travel and dining. I don't really care much about CSR's Priority Pass because I have it through other cards and virtually never have a guest. Since I max out the $300 travel credit with organic spend, I consider it a $150 AF card where I just happen to prepay $300 in travel expenses. If I didn't have to keep at least 1 AF paying card to unlock the value of my UR points that would probably also give me less reason to keep the CSR.

StartinSanDiego

Indeed! For us, it's a toss between an Amex Plat and a CSR.

Need

The 3x on travel earning (and 1.5x on travel spent) alone is pretty much killing all the other hotel/airline credit cards. That's like 4.5%!

I have United MP Club...
3x UR on CSR vs 2x United Miles on United MPC (CSR wins by a mile *pun intended*)

I have Ritz Carlton card...
3x UR on CSR vs 5x Marriott Reward (I think CSR still wins)
A 60,000 MR points room usually is around $300 to $400. That means it will cost less than 30,000 UR points on the CSR.

I have Citi HHonor Reserve card...
3x UR on CSR vs 10x HH points (Again CSR wins)

I will be keeping the Citi HH Reserve because the annual night cert is worth the annual fee. I probably will cancel the UMPC and RC cards when their annual fees hit next year.