Swipe, Spend, Repeat: The Perks Arms Race in Your Wallet

Summary

Episode Summary: "Swipe, Spend, Repeat: The Perks Arms Race in Your Wallet" - The Journal

Release Date: July 1, 2025
Host: Jessica Mendoza
Production: The Wall Street Journal & Gimlet

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Introduction: The Allure of Exclusive Credit Cards

In the July 1st episode of The Journal, host Jessica Mendoza explores the intensifying competition among premium credit card companies, focusing on how perks have become the battleground for customer loyalty and the staggering fee increases accompanying these benefits. Titled "Swipe, Spend, Repeat: The Perks Arms Race in Your Wallet," the episode delves into the evolution of credit cards from mere payment tools to symbols of exclusivity and access, highlighting strategies employed by industry giants like American Express (Amex) and Chase.

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Historical Context: The Evolution of Credit Cards

The episode begins by tracing the origins of credit cards. "The first payment cards debuted in 1950. They were made from cardboard and at the time, credit cards were simple payment tools," Jessica Mendoza explains [03:19]. As the market grew more competitive, credit card companies sought to differentiate themselves by offering rewards such as cash back, travel rewards, and points. These perks became essential for fostering customer loyalty [04:26].

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The Rise of Perks: American Express Sets the Standard

American Express emerged as a leader in the perks revolution. "Perks started to become the big differentiator. And one name in perks stood above the rest... definitely Amex, the American Express card," Imani Mueez notes [05:09]. Amex aimed for exclusivity, targeting CEOs and celebrities with perks like airport lounges and personalized customer service, epitomized by their Platinum card launched in the 1980s with a then $250 annual fee (equivalent to nearly $800 today) [05:47-06:23]. The status symbol was further solidified with the introduction of the American Express Centurion card, colloquially known as the "Black Card," in 1999 [07:02]. This card, with a $10,000 initiation fee and a $5,000 annual fee, offered unparalleled perks, such as free luxury hotel upgrades and exclusive event access [07:09].

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Chase Enters the Arena: The Sapphire Reserve

With Amex holding the premium space, Chase made a significant entry in 2016 by introducing the Chase Sapphire Reserve card. Targeting millennials and the mass affluent, the Sapphire Reserve boasted similar perks to the Amex Platinum but distinguished itself with substantial sign-up bonuses. "They were offering 100,000 points in travel rewards to people who met a certain spending threshold in the first three months of the card," Imani Mueez explains [08:27]. This offer effectively made the card highly attractive to younger, experience-driven consumers [08:35]. Additionally, Chase's move to metal cards, similar to Amex's Black Card, positioned the Sapphire Reserve as a modern luxury option [09:06].

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The Fee Hike: Chase Raises Annual Fees

In a bold move, Chase recently announced a 45% increase in the annual fee for the Sapphire Reserve, bringing it to $795, up from $550 [10:02]. This substantial hike surpasses even Amex's Platinum card fee by $100 [11:36]. "Members now pay $795 a year for the promise of even more exclusivity," Jessica Mendoza notes [11:36]. Chase remains confident, asserting that customers derive over $2,700 in annual value from the card's perks, expecting minimal attrition [14:35].

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Customer Reactions: Mixed Responses to the Fee Increase

The fee increase elicited a range of reactions among cardholders. Brittany Smith, a teacher from New Jersey and long-time Sapphire Reserve member, shares her frustration: "I immediately felt overwhelmed and it just turned into frustration, really. $795 is steep and I feel like unless you're truly utilizing all of the credits, it's just not going to be worth it" [14:02-14:35]. Other customers varied from anger to rationalization, with some pledging to continue using the card despite the higher cost, believing that the enhanced perks justify the new fee. A notable anecdote includes a cardholder who owns both the Sapphire Reserve and Amex Platinum, now facing over $1,000 in annual fees and contemplating which to retain [15:06-15:52].

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Business Rationale: Maximizing Revenue Through Fees and Spending

Chase's strategy hinges on the belief that increasing the annual fee will drive higher spending among cardholders, translating into greater revenue for the bank. "What the banks are betting is that... the fact that you're paying this higher fee is going to make you feel like you have to spend more to make it worth it," Imani Mueez explains [15:55]. This approach is supported by statistics from the Consumer Financial Protection Bureau (CFPB), revealing that $33 billion in credit card rewards go unused annually, out of $40 billion earned [16:31]. By encouraging higher usage, credit card companies can capitalize on both annual fees and increased transactional revenue [16:45].

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Future Trends: The Continued Arms Race and Evolving Perks

As Chase and Amex continue to vie for dominance in the premium credit card market, the competition is expected to intensify. "It's an arms race and the perks are becoming ever more luxurious and ever ridiculous. And in a way, you're kind of seeing banks become hospitality companies," Imani Mueez observes [11:36]. With Amex already hinting at further fee increases in response to Chase's latest move [17:07], the landscape suggests an ongoing escalation in both fees and the exclusivity of perks. This trend underscores the shift of credit card companies into the experience business, where the value proposition now heavily relies on providing unique, high-end experiences that justify hefty annual fees [17:37].

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Conclusion: The Cost of Exclusivity

The episode highlights a critical juncture in the credit card industry, where the pursuit of customer loyalty through enhanced perks comes at a significant cost. While premium cards like Amex's Black Card and Chase's Sapphire Reserve offer unparalleled benefits, the increasing annual fees raise questions about sustainability and customer retention. As banks push the envelope on fees and perks, consumers are left to navigate the balance between exclusivity and affordability, determining how much they value the prestige and benefits that these credit cards offer.

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For more insights and episodes, visit The Journal on Spotify and check out their merchandise at WSJ Shop.

Transcript

[Imani Mueez]

Chicago, how you feeling right now? Makes sense.

[Jessica Mendoza]

Yeah, yeah, it's Lollapalooza. A steamy summer day. The music is thumping. Our colleague Imani Mueez was there last year.

[Imani Mueez]

You know, bright outfits, festival goers, lots of drinks, flowing cups and hands, things like that. And it could be really overwhelming.

[Jessica Mendoza]

But steps away from the chaos of the festival, she found an exclusive hideaway.

[Imani Mueez]

You got access to this air conditioned area and then they had a private bar, plush seating. And one of the more popular amenities in this area was actually the bathroom because they had flushable toilets as opposed to, you know, the porta potties. That can get very porta potties gross on a summer day.

[Brittany Smith]

Right? I mean, to be honest, half the time when I'm invited to like go to a music festival or concert, I'm always like, what's the bathroom situation?

[Imani Mueez]

So I can understand the draw hot commodity for sure.

[Jessica Mendoza]

And the key to unlocking this oasis of free food, booze and flushing toilets.

[Imani Mueez]

You have to flash the right credit card. And in this case, it's the Chase Sapphire reserve card, which is their most premium card.

[Jessica Mendoza]

A credit card. In the last few decades, credit cards have done more than loan you money. They've been symbols of exclusivity and access. But those perks don't always come cheap. The annual fee on Chase's most premium card has been climbing.

[Imani Mueez]

And just recently, Chase just announced its largest fee increase yet for the Sapphire reserve card. They're raising it by 45% to $795, $800.

[Jessica Mendoza]

I mean that's, that's not cheap. But Chase doesn't seem worried about raising its price.

[Imani Mueez]

The banks, the credit card companies have really stumbled onto a winning strategy. They're really optimistic that they can convince their customers that these new benefits are truly worth this higher price point. This is a story about the credit card companies testing the limits of what people are willing to pay for these credit cards.

[Jessica Mendoza]

Welcome to the our show about money, business and power. I'm Jessica Mendoza. It's Tuesday, July 1st. Coming up on the show, why fancy credit cards are getting even pricier.

[Unknown]

This message is brought to you by Apple Card. Each Apple product, like the iPhone 16, is thoughtfully designed by skilled designers. The titanium Apple card is no different. It's laser etched, has no numbers, and it earns you daily cash on everything you buy, including 3% back on everything at Apple. Apply for Apple card on your iPhone in minutes, subject to credit approval. Apple card is issued by Goldman Sachs Bank USA Salt Lake City Ranch terms and [e-mail].

[Jessica Mendoza]

The first payment cards debuted in 1950. They were made from cardboard and at the time, credit cards were simple payment tools.

[Unknown]

Diner's Club, the first card. That's why BankAmericard is becoming Visa, the most widely recognized card in the world. The new products of the 80s are now under the MasterCard name.

[Jessica Mendoza]

Using a credit card lets you pay for things on credit. At the end of the month, you pay off your balance or carry some of the money with interest. Basically, it's pre approved loans to pay for, say groceries, clothes or meals at restaurants. The companies behind them get a small cut from that interest as well as from various transaction fees, annual fees, late fees. But as the market got more competitive, credit card companies needed a way to stand out. One idea was to dangle little rewards for loyalty. Things like cash back, travel rewards and points.

[Unknown]

So what's in it for you? The miles. Only one card lets you earn frequent flyer miles on every major US Airline.

[Imani Mueez]

Perks began to escalate because all cards were kind of the same, right? So why should a customer use one company's card over another? And the way that you do that is you convince them that your perks are better than another card company's perks. So that's how it started. It's really the card companies competing to prove that their little piece of plastic is somehow better than another company's piece of plastic.

[Jessica Mendoza]

Perks started to become the big differentiator. And one name in perks stood above the rest.

[Imani Mueez]

Definitely amex, the American Express card.

[Jessica Mendoza]

Don't leave home without it.

[Imani Mueez]

It was amex's idea to be exclusive from the start. They wanted to be the card that CEOs, celebrities had in their wallet.

[Unknown]

You guys take American Express, let's go.

[Imani Mueez]

If you're looking for a more affluent segment, they want more exclusive perks. So that's why you had American Express doing things like the airport lounges. They pioneered that, this exclusive experience to get you kind of out of the fray of the boarding experience and the airport gates.

[Unknown]

On every American Express card, there is one word we take very seriously. Member American Express Customer service. To us, membership means personal service.

[Imani Mueez]

And then in the 80s, they launched their Platinum card, which was kind of the first of these super premium cards. And the fee at that time was $250 a year. And just to put that in perspective, $250 in 1984 when the card was launched. That's almost $800 of today's money.

[Jessica Mendoza]

Using a platinum Amex was a flex.

[Imani Mueez]

Slapping it down on the counter as you're paying for something was a status symbol. You might get looks from a clerk here and there. So that was part of the lore of that card, if you will.

[Jessica Mendoza]

The card and its elite perks were so successful that in 1999, Amex went a step further. It launched a new card you couldn't even apply for.

[Imani Mueez]

That card actually launched as a response to rumors about this super exclusive Amex card that was only available to celebrities, and it was invite only.

[Jessica Mendoza]

It had a distinct monochromatic look. Officially, it was known as the American Express Centurion card.

[Imani Mueez]

That card was colloquially known as the black card. Black card, Amex black card.

[Unknown]

The American Express black card.

[Jessica Mendoza]

And it even became commonly referenced in popular music. Can I buy some of your type.

[Imani Mueez]

And charge it to my black card? I went to the malls and I balled too hard. Oh my God, is that a black card?

[Jessica Mendoza]

I Black card members pay a $10,000 initiation fee and a $5,000 annual fee. In exchange, they get things like free upgrades at luxury hotels and access to red carpet events.

[Brittany Smith]

I do sort of remember when everybody was like, oh, yeah, they have a black card. Implicitly saying they can pretty much afford anything.

[Imani Mueez]

Yes, yes.

[Jessica Mendoza]

In the 2000s, perks were driving credit card loyalty, and American Express was the undisputed heavyweight. But as millennials started making more money and craved experiences they could post on Instagram, a new player saw an opening. It started to come for amex's crown.

[Imani Mueez]

Sapphire Reserve from Chase. Make more of what's yours. So in 2016, JPMorgan Chase, the largest bank in the country, kind of stepped up to the plate. And Chase's big play for that market was introducing the Chase Sapphire reserve card. And it had a lot of comparable perks to the Amex Platin. But what made a really big difference was that they had this crazy sign on bonus.

[Jessica Mendoza]

The offer was wild enough points for a round trip flight from New York to Tokyo.

[Imani Mueez]

They were offering 100,000 points in travel rewards to people who met a certain spending threshold in the first three months of the card. But really, at the time, it was a no brainer to sign up. It was almost like they were paying you for having the card. Well, there's a hot new credit card that is all the rage among millennials.

[Jessica Mendoza]

You earn 100,000 bonus equal $1,500 to spend toward airfare, hotels, cruises, and car rentals.

[Imani Mueez]

This card is really beloved by many.

[Jessica Mendoza]

Especially millennial young, professional, urban types.

[Imani Mueez]

The other thing that was really unique about the Chase Sapphire was that prior to that, most credit cards were made out of plastic. Most of them to this day are still made out of plastic. But there was the Black card, which was made out of titanium, right?

[Brittany Smith]

Of course it was.

[Imani Mueez]

Of course it was.

[Brittany Smith]

Why wouldn't it be?

[Imani Mueez]

Because it's fancy. It needs to make a sound when you Dr. But then when Chase introduced the Sapphire Reserve, their card was metal. As a matter of fact, the card was so popular when it launched, Chase temporarily ran out of the metal to make it.

[Jessica Mendoza]

That's wild.

[Imani Mueez]

Chase lost money the first few years that the card was out and they had to shut down that sign on bonus early because it was so wildly popular. But that was the first time that these types of premium cards were that they were really marketed to the everyman or like the mass affluent consumer segment more so than just that exclusive business class.

[Jessica Mendoza]

Chase's Sapphire Reserve card was a blockbuster despite its original $450 annual fee. Although the fee was on par with other premium cards. Mid tier cards only charged about 100 bucks or no fee at all. The Sapphire Reserve also had higher than average interest rates.

[Imani Mueez]

You should not carry a balance on these cards. I think that's the short of it. Like if you do carry a balance, especially for more than a month, the interest payments will quickly, quickly offset any benefits that you may get from these cards. And that's before you even account for the annual fee.

[Brittany Smith]

So having said that, how would you describe the luxury card landscape of the past few years?

[Imani Mueez]

It remains really competitive. The two bigger players are Chase and Amex. Amex. I think they have a few decades of experience and history in this market, so some of that is just momentum. But Chase is gaining quickly. People think the Sapphire's gotten a leg up on the Amex cards now and especially in making it a little bit more accessible to again, mass affluence, maybe millennials, up and comers, younger generations. These experience are becoming a larger part of their value proposition to their customers. So what we're seeing is an arms race and the perks are becoming ever more luxurious and ever ridiculous. And in a way, you're kind of seeing banks become hospitality companies.

[Jessica Mendoza]

Which brings us to Chase's latest fee increase. Members now pay $795 a year for the promise of even more exclusivity. That's 100 bucks more than an Amex Platinum. But how much can Chase push that fee before longtime customers push back? The new price tag is scaring me a little bit.

[Imani Mueez]

There's a lot of sticker shock. You can't afford this.

[Jessica Mendoza]

Chase's big gamble is after the break.

[Brittany Smith]

Psst.

[Unknown]

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My name is Brittany Smith, and I've been a Chase Sapphire Reserve member for the past six years.

[Jessica Mendoza]

Now Brittany's a teacher in New Jersey. She's one of those millennials who jumped in years ago to grab a Chase Sapphire Reserve card. She was traveling more frequently, so she got in for the points.

[Unknown]

And I realized I was missing out on a ton of perks and benefits that come along with certain travel credit cards. And I kept hearing about the Chase Sapphire Reserve and I decided to research it and it seemed like the best deal at the time. So that was part of the reason why I ended up joining the CSR team.

[Jessica Mendoza]

In case you didn't catch that, that's CSR Team, as in Chase Sapphire Reserve.

[Unknown]

It's intense. I've coined the term.

[Jessica Mendoza]

The annual fee when Brittany joined was $450. At the time, she felt that the math and the perks worked in her favor.

[Unknown]

So it made sense to pay that annual fee because the $300 travel credit alone helped it pay for its Basically.

[Jessica Mendoza]

Brittany became a Chase Sapphire Reserve evangelist, often trying to convince family and friends to convert to the card. Then last week, I officially received the.

[Unknown]

Email from Chase Sapphire explaining, you know, the quote unquote new perks and the price jump. But yeah, initially it was just shock and I immediately felt overwhelmed and it just turned into frustration, really. $795 is steep and I feel like unless you're truly utilizing all of the credits, it's just not going to be worth it. And this might not be the card anymore. Unfortunately.

[Jessica Mendoza]

Chase says it doesn't expect much attrition. Even with the fee increase, Chase says customers can still get more than $2,700 in annual value from the perks. The company is also counting on longtime customers who don't want to pay the new fee to stick with Chase, but maybe downgrade to a less expensive card. Our colleague Imani Moise heard a range of customer reactions. Some were angry, annoyed by some of the changes. Others were nonchalant about the price hike. Some are crunching the numbers.

[Imani Mueez]

One of my favorite reactions was a guy who didn't even realize what his annual fee was.

[Jessica Mendoza]

No.

[Imani Mueez]

Yes. But when I told him about the price increase, he kind of quickly justified it and saying, you know what? Like, I use the Lounge X amount of times I've used my rewards to go here and here and here. So I'm pretty sure I could make it work. I did talk to one cardholder who actually has both the Chase Sapphire Reserve and the Amex Platinum. And with this new increase, he's now in a position where he's going to be paying more than $1,000 a year just in credit card card annual fees. And he says that he needs to make a decision as to which card to keep. Right now, it's not looking good for the Sapphire Reserve.

[Jessica Mendoza]

So what is Chase betting on here? What's the business rationale?

[Imani Mueez]

What the banks are betting is that, like, if you don't care about the fee, you're going to spend more money. And just the fact that you're paying this higher fee is going to make you feel like you have to spend more to make it worth it. And so it's going to increase engagement, which increases their revenue. There's definitely a segment of the market that is not going to care. They're going to do what the first person I spoke to did and quickly rationalize the fact that, hey, I'll get more benefits out of this even if they don't. There's a CFPB stat saying that $33 billion of credit card rewards were just kind of left unused at the end of the year that the study was done.

[Brittany Smith]

$33 billion of just like money on the table that people are leaving.

[Imani Mueez]

Yes. And that was out of $40 billion worth of rewards earned that year. So, yeah, I think that's a calculus that's been proven over and over again for the banks.

[Jessica Mendoza]

It's a trade off. They might lose more price sensitive customers, people like Brittany, that teacher in New Jersey. But if their core customers spend more on the card, they win. In 2022, banks earned $6.4 billion in revenue from annual credit card fees, double what they made in 2015. All the more reason to keep pushing the envelope on those fees.

[Imani Mueez]

As Chase started to tease the card refresh that it just announced with the higher fee, Amex started teasing its own refresh that it's going to announce later this year because it's a company that prides itself on having the highest price point in the market. So I think, I think we could reasonably expect that their new fee is going to be even higher than what Chase just announced.

[Jessica Mendoza]

So what could this trend of higher fees and more perks mean for credit card companies?

[Imani Mueez]

It means that these credit card companies are kind of in the experience business, right? Like, if convincing consumers that, again, their piece of metal or plastic is better than a very comparable piece of metal or plastic depends on the experiences and the feelings that they can get out of that card. You're seeing them invest more and more in things like dining lounges, hospitality, things like that.

[Brittany Smith]

What does this tell you, Imani, about what people are willing to spend to get a little bit of exclusivity?

[Imani Mueez]

I mean, so far it seems like they're willing to spend at least $800. Like people like feeling special. And if you can give them that, because it's an intangible psychological feeling of having something exclusive, being given access to something that other people can't, but also in a visible way. So people see that you have this thing. It's hard to put a dollar figure on that.

[Jessica Mendoza]

That's all for today. Tuesday, July 1st. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode from Jacob Passi. Thanks for listening. See you tomorrow.