On Friday, J.P. Morgan Chase revealed that credit card customers who redeemed the bank's points "faster than anticipated" cost it $330 million in the second quarter of 2018.
“This is maybe larger than we have seen over the course of the last several years,” Chase CFO Marianne Lake told reporters. “We do pretty regularly review our rewards liability in light of evolving consumer behavior.” The statistic was buried deep in Chase's second quarter earnings report.
In recent years, websites such as The Points Guy have taught millions of consumers how to make their credit cards and travel rewards work for them. As a result, consumers are more informed than ever about the best ways to track their everyday spend, Bankrate.com chief financial analyst Greg McBride told CNBC. “There’s a subset of savvy credit card users who are diligent about maximizing their usage to capture the biggest benefit they can,” said McBride.
This isn't Chase's first encounter with the power of educated credit card super users. In 2016, the issuer made a major move to up the stakes in the premium credit card market by launching the wildly popular Chase Sapphire Reserve card. The lavish initial 100,000-point sign-up bonus, coupled with 3x rewards for travel and dining as well as a $300 travel credit and Priority Pass lounge access amongst other valuable perks, led consumers to apply for the card in unprecedented numbers. The Reserve alone constituted a major portion of Chase's 35% increase in credit card sign-ups in the third quarter of 2016 and cost the bank an estimated $300 million in quarterly profit that year, although a better-than-expected retention rate the following year helped balance the books.
During the earnings call, Lake said that the $330 million charge represented a positive trait overall for Chase's relationship with cardholders, citing patterns of strong loan growth, low attrition rates and modest credit card charge-offs. “Engaged customers bring us more spend; they bring us more of their share of [their] wallet,” she said. The bank also announced a record $8.32 billion profit in its earnings report for the second quarter of 2018.
If you want to make sure you have the right credit cards in your purse or wallet — and that you're getting maximum value for your travel rewards — check out some of TPG's most popular posts on earning and redeeming Chase Ultimate Rewards points:
