christianj

Just got an email offer to change VX from a credit card to a charge card without a preset spending limit. With a decent credit limit now, is there a reason to do this? Has anyone done it and if so why and what has been your experience?

OskiBear

I received the same email and am tempted to take them up on this. I use this card a lot and it has been a bit of a pain a few times when I've wanted to make large purchases

WasKnown

As surprising as it may be to people in the points and miles game, the active account figures for the Venture X are not satisfactory. Capital One is not very good at underwriting prime and super prime customers and is even worse at figuring out how to monetize them. I�m not too impressed with their attempt to convert select users to charge cards in an attempt (presumably) to drive more interchange revenue. Time will tell if this proves to be a winning strategy. Methinks the answer is no.

What Chase has accomplished with the Sapphire cards (particularly the CSP in recent years) is nothing short of incredible. I don�t expect them to lead the charge for anything because they simply do not have to.

Amex is definitely playing a different game from every other issuer (though we are seeing some convergence). The real winner is Visa, who has been crushing analyst expectations earnings season after earnings season. During the great Meta capitulation, Visa market cap even flipped meta to become a top 10 company by market cap.

mia

I wonder if this also frees up capital because they (perhaps) no longer need to calculate loss reserves based on the full revolving credit line?

WasKnown

Perhaps. I would be surprised if this was a large difference as they are likely targeting transactors specifically for the charge card conversions.

NYC Flyer

Interesting discussion. Can you point us to some specific reports or disclosures addressing this? What are the charge card products they are pushing, or are you simply inferring that the highest cash-back/rewards focused products are positioned as "charge cards" in that the target audience tends to not carry a balance. Capital One certainly has developed products that appeal to this audience, IMHO, and their customer service seems to have improved in recent years to support these cards.

Chase built quite a mountain, but others are starting to chip away at its foundation and, without innovation on Chase's part, will continue to do so. At this stage, still, I'd guess the numbers signing up for the "perfect starter" rewards card still dwarf those downgrading because they have replaced Chase Sapphire with Bilt, Capital One, Amex Gold, etc. The development of the lounge network, while welcome, is certainly an indicator that the CSR, at $550/yr, had become less relevant than it once (thus, the innovation).

Visa certainly positioned itself to ride the wave of some very profitable portfolios (Chase Sapphire/United/Costco)

Certainly, shifting the quality of new accounts/total exposure toward prime/super-prime would help, but whether the new customer acquisitions are for revolving or charge type accounts would not seem to have an impact within this category of customer, IMHO. Shifting existing accounts to different products would not seem to have an impact on overall risk exposure (not to mention that the lowest risk customers are really the target audience for charge products). I've not dug through Capital One's financial disclosures, but could not find any search references to "charge card conversions" and Capital One.

dayone

Charge cards also have limits. Are you sure a charge card would authorize purchases above a $30K credit card limit? Have you requested a CL increase?

mia

I have created a separate thread for this discussion. Scroll back to post 1 to review reports.

WasKnown

A lot to unpack here.

Assuming you are referring to targeted charge card Venture X offers, MIA linked a thread with some data points.

I have not seen any data to suggest Chase market share is decreasing. Can you cite something? If anything, their market share has increased with the, crucially taking over from Amex for PV https://wallethub.com/edu/cc/market-...d-issuer/25530 All data I have seen on acquisition shows Chase consistently beating all other issuers. I expect to see a lot more consolidation into Chase across banking over the next few years for obvious reasons.

Agreed. Visa is the big winner here with every major issuer besides Amex and Citi (though even Citi has been forced to issue a Costco Visa). In not sure how defensible their market position is but their shareholders (not me) are probably quite pleased right now.

There are many data points of these targeted charge card offers across both FlyerTalk and Reddit, as MIA as linked. I doubt they are doing it for risk either as most data points indicate they are targeting transactors anyway. My best guess would be this being a play at trying to drive more of to capture further interchange revenue. There are cases where I need to make a large purchase (mid 5 figures) and have no option but to put it on an Amex charge card, even if the rewards are sub-optimal.

christianj

I'm having a hard time following your logic on C1 not being successful. I for one have stopped using my Chase FU in favor of the C1 VX and I assume many are in the same boat. What does it really matter to them if someone like me who pays off their balance each month holds a charge or a credit card? Yes, I know that if I don't pay it off they get interest but I do pay it off so what benefit is there to changing me over to a charge card? That was the question I was seeking an answer to when I posted my question. Are their benefits of either? I guess that I will be forced to pay my balance monthly but clearly their experience with me dictates that I already do that.

On another topic, there seems to be a discussion every couple of months about Amex or Chase crushing it and then the following month there is a discussion on how specific products are causing them to loose money. This just seems like the nature of the game for me and as a consumer why do I care about analyst expectations and the issuers market cap.....I care about CC offers that work for my spending habits.

NYC Flyer

Not at all. I suppose I was responding primarily to the emphasis on what Chase had accomplished with Sapphire cards, rather than their entire card business. As I previously conceded, it's quite possible acquisitions may still be outpacing defections due to sign up bonuses and the constant promotion of CSP as the "perfect starter" points card. I know many who downgraded their Reserve cards when the fees increased (and see the introduction of the Chase lounges as an acknowledgement that the CSR needed more benefits to sustain/grow the portfolio).

Agree. Venture X seems to have some crossover appeal vs both CSR and CSP, as the net cost of the card is pretty much zero. I have replaced CSP with Bilt (zero annual fee, 3x dining, UA, Hyatt and AA transfers) and use Venture X for non-bonused spend and will likely drop to a no-fee Chase card to keep the credit line at renewal.

WasKnown

Charge card conversions is not an argument that the Venture X is performing poorly. It is the result of that poor performance.

What is already shown in their most recent 10K is revealing enough. Despite a massive increase in active accounts, payment volume is almost flat. For their credit card business, income from continuing operations net of tax is at 4.9 billion for 2022 down from 7.8 billion in 2021. Most interestingly, their net charge-off rate for 2022 is 2.53% (up from 1.90% in 2021).

If we look more recently, Capital One as a whole is obviously doing quite poorly having missed analyst expectations for EPS by 40.56% for Q1 2023. In ER they specifically cited "worsening credit in their domestic credit card portfolio" as major reasoning that led to their $1.1 billion allowance for credit losses. Their 2023 Q1 income from continuing operations net of tax (again for the credit card business) was at 549 million which is down from 1.5 billion for the same 3 months a year ago. Their net-charge-off rate is up to 4.06% for this period from 2.18% for the same period last year.

Capital One would like to position itself as a tech company but I think they would benefit from getting better at underwriting before they go off too far in that direction.

I'm not sure by what metric Chase is struggling... As we have discussed, its credit card business has only been growing. In terms of consumer deposit market share, Chase has grown year over year for almost every year since 2018 with the exception being 2021. In 2021 it ran flat whereas its largest competitors (Bank of America and Wells Fargo) both meaningfully contracted. And nominally, obviously, Chase has grown its deposits business year over year regardless of market share.

You and christianj are speaking anecdotally about your own experiences and observations with the cards. Those are perfectly valid in the context of your preferences. However, it is not a reliable heuristic for what is happening at a large scale with these banks. As they are publicly traded companies, we can rely on data and not personal anecdote to draw conclusions.

I agree that C1 Venture X has a rich value proposition. I am no fan of Chase credit card products as my post history dumping on their cards shows. But my view on this is grounded in the facts I have laid out rather than my personal opinion as a prospective customer.

NYC Flyer

Points are well-taken. Stil, without product-level reporting, it's hard to say what's driving relative success/failure with each issuer. Venture X could be outperforming on every metric and masking even worse performance on less-prime cards for Capital One. Regardless, if I were choosing between the two as an investment, JPM is clearly the winner!

WasKnown

Sadly, product level reporting is not publicly available information. I have strong reason to believe the Venture X was very strong on new account acquisition (but not purchase volume) in 2022 but has not fared well (net lost accounts) in 2023. I think you will find people privy to this information would agree with that but debating that point is futile as no one will leak data sets here.

Regardless, we know that the Venture X was not strong enough as a product to drive growth to C1’s credit card business (which instead massively contracted). If C1’s credit card business flatlined, I could understand being skeptical of weak Venture X performance. But Capital One’s entire credit card business is bleeding. So we can either believe

1) Their card portfolio, which has been performing solidly even through the pandemic relative to peers, has suddenly radically changed the direction of its performance while their new product remains one of the sole strong performers in their portfolio

OR

2) The high capex product that relies on consistently high new user acquisition to remain sustainable has stopped meetings it’s targets amongst a highly competitive landscape (dragging the entire book down as a consequence)

Occam’s razor. We’ve seen this play out with issuers better capitalized and better positioned than Capital One (Citi) before. For Capital One to credibly and sustainably challenge Chase here, they would need to be a true aberration. Possible? Yes. Plausible? Not yet.

eponymous_coward

That�d be pretty mind blowing seeing C1 86 their lounges (because if you�re not pushing the VX, why would you keep the lounges?) and keeping the VX on life support like the RC card (Chase) and the Citi Prestige�