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@elleandish tweeted me yesterday (thanks!) with a link to the Chase website where the Chase Sapphire Preferred was offering only 40,000 Ultimate Rewards points after spending $3,000 within 3 months.
I also haven’t yet been asked to remove the banner ad on the blog which still offers 50,000 Ultimate Rewards points, so for now, the 50,000 point offer is still available. You don’t have to use our link to apply, but Emily and I are always very grateful when you do!
I don’t understand why Chase is offering 40,000 points though their own website, but is paying affiliates a commission to promote a better version of the offer (which is not available on the Chase website)! This doesn’t make any sense, and I wonder how much longer it will last.
I also googled “Chase Sapphire Preferred” and the only paid ad by Chase was for the 40,000 point version.
I normally wouldn’t have posted about this except that I still don’t have the Chase Sapphire Preferred card, so I would have hated to see the offer decrease to 40,000 points before I applied for it. Though, to be fair, a 10,000 point decrease isn’t that bad. It would be much worse if it decreased to 25,000 points (perish the thought!)
I had also just finished reading an investor presentation which showed just how high Chase’s current marketing expenses for credit cards are when compared to prior years. And I’m sure the higher marketing costs are driven in part by high sign-on bonuses.
1. I still haven’t applied for the Chase Sapphire Preferred. This may surprise some of you, but I still haven’t applied for the Sapphire Preferred! Emily applied for the card in June last year, and I was going to apply it for just before she cancelled hers.
That way, we’d get the sign-on bonus for both of us, AND we wouldn’t have to pay an annual fee to use the Sapphire Preferred in the 2nd year. Emily would have the card in year 1, and I’d have the card in year 2. And hopefully in year 3, Chase would introduce a new variant of the Sapphire Preferred and we’d repeat the cycle!
The Sapphire Preferred is one of those rare cards where it does make sense to actually use the card for regular spending as opposed to just for the sign on bonus. The double points on travel and dining are a nice bonus, and we like that it doesn’t charge a foreign transaction fee. And I love having the option to earn valuable United or Hyatt points or even Southwest points now that we have the Southwest Companion Pass.
I have my March App-O-Rama planned for this weekend, and I was planning to apply for the Chase Sapphire Preferred then, so I was a bit concerned when I saw @elleandish‘s tweet.
2. The Competition. The American Express Premier Rewards Gold (which competes with the Chase Sapphire Preferred) recently increased their bonus to 25,000 points from 15,000. To me, that’s a low bonus for an over-rated card, but I found it interesting that American Express didn’t raise the stakes by matching Chase’s 50,000 bonus on the Sapphire Preferred.
Executives from large companies can’t usually get together and decide what incentives to offer or what price to sell their goods because of anti-competition laws.
But they can send signals that they would like to reduce the overall level of sign-up bonuses.
- Chase recently changed the wording on the advertisements in the affiliate channel to include the words “limited time offer.”
- American Express increased the sign-on bonus on the Premier Rewards Gold to 25,000 points and not 50,000 points.
- And now, Chase is testing versions of the Chase Sapphire Preferred with only a 40,000 point sign-up bonus and not a 50,000 point offer.
These could be interpreted as signals that both Chase and American Express want to reduce the high sign-up bonuses which we are used to.
3. Chase’s Marketing Expenses & Strategy. Chase recruited Gordon Smith – a 25 year veteran of American Express who used to head American Express’s Card services division – to head Chase’s credit card division.
There’s nothing quite like hiring the head of your closest competitor to gain market share from that competitor. And by all accounts, Gordon Smith has delivered the goods. Data below is for “Card Services & Auto” which is how Chase reports financial information for their credit card division.
- Chase has grown revenue margin at a Compounded Annual Growth Rate (CAGR) of 6.8% vs. 0.4% for American Express from 2008 to 2011
- Increased “New accounts” by 25% from 2009 to 2011
- Increased “Sales volume from new accounts” by 98% between 2009 and 2011
But Chase’s credit card growth has come at the expense of higher marketing expenses than compared to previous years. There’s nothing unusual in spending money to gain market share!
This graph shows just how high Chase’s marketing expenses were in 2011, when compared to 2009. Also note the decreasing trend in 2012.
I suspect that this increase is likely due to higher advertising, signing up more affiliate marketers like me, and also because of the high sign-on bonuses.
The bad news is that Chase recognizes that marketing expenses have increased – they mention it in investor presentations and also in their SEC filings.
At the very least, we can expect Chase’s senior managers to be aware of the increased marketing expenses and working on plans to bring them down. That could mean lower advertisements, lower affiliate payouts, and worst of all lower sign-up bonuses.
I don’t have any inside information, but I wouldn’t be surprised if the sign-up bonus is reduced to 40,000 points. Though I do hope that’s only a temporary decrease. On the other hand, this could be like the Southwest card where there is still a 50,000 point offer floating around long after the official bonus has reduced to 25,000 points.
I’m not going to say when you should apply for the Chase Sapphire Preferred. The answer, as always, is when it makes sense for you. But I know that I’ll probably apply for it in the next few days as I had originally planned.
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