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Update: Some offers mentioned below are no longer available. View the current offers here – Chase Sapphire Reserve

Travel rewards cards are a great way to get you to that next redemption — be it an award flight in international first class or a luxurious hotel stay — but at the end of the day, they’re still part of an issuer’s business strategy. Lenders like Bank of America, Citigroup and JPMorgan Chase & Co. aren’t just giving you points and annual travel credits out of the goodness of their hearts; these perks are incentives to attract more customers and drive growth.

It looks like this strategy is working, at least when measured by one metric; Chase reportedly saw a 35% increase in new card accounts in the third quarter, and apparently the recently introduced Chase Sapphire Reserve Card is partially to thank. Since it launched in September, the card’s attracted plenty of attention, thanks to benefits like a 100,000-point sign up bonus, a $300 annual travel credit and 3x points on all travel and dining purchases — all of which help justify a $450 annual fee. Chase even ran out of metal cards due to unanticipated demand for the Reserve.

While a 35% bump in new accounts is certainly good news for the lender, the flip side is that JPMorgan Chase & Co. — along with Bank of America and Citigroup — reported that combined income from credit card operations in the third quarter dropped 15% year over year. And, at the same time, expenses in the lenders’ consumer-bank units rose 1%, to $15.3 billion.

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Competitive travel rewards programs are costing banks link Chase and Citigroup.

Since an issuer’s ultimate goal is to create revenue, what does this drop in income and increase in expenses mean for travel rewards cardholders? Likely nothing in the short term. The competition for customers in the credit card space is heating up — and Amex has already responded to the Sapphire Reserve’s generous benefits by adding a 5x points category for airfare purchases on its premium Platinum Card from American Express. Issuers are jostling each other for your business, and gaining market share is always an important goal.

That said, an issuer’s hope is that the cost of offering such generous cardholder perks is offset by customers taking on debt — and some industry analysts worry that the battle for customers’ business is eating away at profits. Hopefully Chase and other lenders won’t decide to rein in their travel rewards incentives, but there’s definitely a limit to their generosity here, and we might just be approaching it with cards like the Reserve and Amex Platinum. Still, no matter what the future brings, it’s in your best interest to follow the Ten Travel Rewards Card Commandments by always paying your balance in full and never missing a payment — taking on debt may offset the cost of expensive rewards programs and make offering “free” perks more affordable for lenders, but it’s definitely not worth the dings to your financial health.

H/T: Bloomberg

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