Have card issuers opened a Pandora’s box by offering temporary pandemic benefits?
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Many cardholders, including myself, have seriously considered closing one or more cards during the pandemic. After all, most of us are traveling less than we did before the pandemic. Some of us aren't traveling at all right now. And almost all of us are spending money differently now.
For example, before the pandemic, I was traveling full-time as a global digital nomad. As such, my largest expenses were typically for airfare, hotels and restaurants. But now I'm traveling the U.S. by RV during the pandemic. So my primary expenses are gas, groceries and campsites. As such, I've shelved my previous go-to cards such as the Chase Sapphire Reserve and The Platinum Card® from American Express in favor of the American Express® Gold Card, Citi Premier® Card, Capital One Venture Rewards Credit Card and The Blue Business® Plus Credit Card from American Express.
But card issuers need cardholders to keep their cards open and continue spending on them in order to be profitable. So many card issuers rolled out temporary pandemic benefits earlier this year. For example, Amex added temporary statement credits to many of its cards. And several issuers added other ways to use travel credits and improved redemption rates for non-travel redemptions. But many of these temporary benefits will expire soon.
As such, today I'll consider whether card issuers have opened a Pandora’s box by offering temporary pandemic benefits and then taking them away. Specifically, I'll consider the case for extending or replacing temporary perks as well as the case for letting these perks expire.
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Pandora's box of temporary pandemic benefits
The temporary pandemic benefits introduced by card issuers have become a Pandora's box. In other words, these temporary perks have become a source of great and unexpected trouble for card issuers.
After all, card issuers introduced these benefits to retain (and even attract) customers in the early stages of the coronavirus pandemic. Now, cardholders aren't happy to lose these temporary perks when the pandemic is still limiting their travel and everyday life nine months later. And issuers struggle with how to make a profit in a changing world.
The case for extending or replacing temporary perks
With IHG's anniversary night extension announcement last week, all major hotel loyalty programs have extended expiring free night certificates into at least mid-2021. Granted, hotel free night certificates are different than limited-time pandemic perks on credit cards. And credit card issuers have different incentives than hotel loyalty programs. But, the point is that multiple hotel loyalty programs decided to extend free night certificates further.
It's certainly possible that we'll see credit card issuers extend temporary perks or even provide new perks. However, credit card issuers are only incentivized to do so if it benefits them. I reached out to American Express, Chase and Citi for comment on whether each issuer plans to extend temporary perks or provide new replacement perks. As of publishing, only an American Express spokesperson responded to my request to say:
We are continuously evaluating new ways to support our Card Members and will share more information as it becomes available.
So, this response might indicate that new temporary perks are coming soon. But I expect card issuers will design any new or extended perks to do at least one of the following:
- Retain customers who may otherwise cancel their card
- Encourage cardholders to spend on their cards
- Provide non-travel redemptions options
As such, I expect we may see elevated bonus categories, spending challenges and new partner statement credits to encourage card usage. We'll also likely see additional non-travel redemption options. I also expect we'll continue to see lucrative retention offers for cardholders that card issues have determined are particularly valuable.
The case for letting temporary perks expire
As much as cardholders don't want to hear it, I can see a case for letting the temporary pandemic benefits expire. For example, Amex likely isn't incentivized to extend the limited-time statement credits on its cards. After all, many cardholders will likely continue to pay for these services with their Amex card. Some cardholders will continue to do so for simplicity. In contrast, others will do so because they've decided they value the service enough to pay for it even without the statement credit.
Likewise, some card issuers allowed cardholders to use travel credits for other types of expenses for a limited time. For example, Hilton Honors American Express Aspire Card cardholders could use their up to $250 annual resort credit at U.S. restaurants through Aug. 31, 2020. But, even if your anniversary year reset on Sept. 1, you'll still have until Sept. 1, 2021, to visit a Hilton resort and use your credit. It's not unreasonable to expect that travel will be feasible and advisable for most cardholders by that time.
The information for the Hilton Aspire Amex card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Frankly, card issuers have to draw the line somewhere when extending or replacing benefits to retain customers. Some cardholders would like card issuers to make travel rewards cards more broadly usable in everyday life. But, I'd rather premium travel rewards cards keep their focus on travel. After all, travel perks are the reason I signed up for the card in the first place. And with vaccines beginning in the U.S., I hope to resume travel responsibly by next summer or fall.
As such, it may be better for issuers to end temporary perks and direct cardholders who can't justify keeping the card without the temporary perks toward a card that is a better fit. Of course, card issuers may offer lucrative retention offers and targeted spending offers to their most valuable customers instead of encouraging them to product change.
Decision time for cardholders
In the end, card issuers will make their decision. I suspect we will continue to see retention offers for select cardholders. And, we may see some limited-time bonus categories for restaurants, grocery stores and gas stations. But I don't expect we'll see the same level of temporary pandemic benefits going forward.
As a cardholder, this means you may need to make some difficult decisions as your annual fees come due. However, I'd recommend not only considering what value each card provides when the annual fee comes due, but also the value you can realistically see the card providing for the following year. After all, the annual fee is effectively a membership fee that you have to pay to get access to the card's earning and benefits for the following year. But, in some cases, it may make sense to close or downgrade your card.
Some cardholders are also opening new cards during the pandemic. I've added a few new cards to my wallet during the pandemic for various reasons, including elevated sign-up bonuses and my quest to earn Marriott Bonvoy Platinum Elite status this year.
Applying for a new card may allow you to put your spending toward earning a sign-up bonus. Plus, if your spending has changed significantly during the pandemic, a new card can boost your earning rate in a category where you're currently only earning one point or mile per dollar spent.
As a cardholder, there are two primary ways to consider temporary pandemic benefits. On the one hand, these benefits were a surprise addition rolled out during the pandemic that you didn't expect when you applied for the card. But, on the other hand, if you aren't traveling now and don't plan to use your card's travel perks in the foreseeable future, you may feel shorted. Hence the Pandora's box for card issuers.
It's easy to get irrationally attached to a card and it's perks. For example, I love the Hilton Aspire's Hilton Diamond status and the Amex Platinum's lounge access. So, these perks might persuade me to keep these cards even if I'm not traveling now. After all, I suspect I'll be able to restart traveling in mid-2021 and use these benefits enough in my cardmember use to justify paying the annual fee on the Hilton Aspire card at $450 (see rates and fees) and the Amex Platinum at $695 (see rates and fees), respectively.
But, if you're uncertain when you'll start traveling frequently enough to get significant value from your card perks, the rational decision might be to downgrade your card. After all, the card issuer may allow you to pay the increased annual fee and upgrade your card at a later point.
For rates and fees of the Amex Platinum card, click here.
For rates and fees of the Hilton Aspire card, click here.
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