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[00:01]
A
This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day, but what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. Listen@schwab.com WashingtonWise.
[00:29]
B
This is yous Money Matters from the Wall Street Journal.
[00:34]
C
Welcome to youo Money Matters. I'm Charlie Turner in New York. The Chase Sapphire Reserve credit card has some pretty generous reward offers for customers, but apparently that, along with high demand for the Sapphire, has not made the card very rewarding for its issuer, JPMorgan Chase. The bank is looking to cut costs at the unit that oversees Sapphire, and company officials are wondering when and if the card will make for JP Morgan. Joining us from Los Angeles is Wall Street Journal reporter Emily Glaser. Emily, you write that JP Morgan wants to cut $200 million at this card unit. Is that an acknowledgement that the card has perhaps worked too well?
[01:13]
B
It's a really interesting case, Charlie, and I think the cost cuts of around $200 million at the consumer banking unit definitely can tell us a couple of things about how the business is going right now. What we know from our sources is that it's not directly the only there's multiple factors. When a bank as large as JP Morgan and a unit as large as its consumer banking unit, which by the way includes branches, cards, small business, a whole host of things decides to do mid year cost cuts like that. But it certainly seems suspicious to us, especially after hearing about the concerns inside the bank about how and if the Chase Sapphire reserve card, one of the biggest hits Chase has ever had, whether that will make money or not.
[01:55]
C
Well, you write that spenders are growing savvier about maximizing benefits and avoiding balances that pad the bank's profits. And these are the customers that JP Morgan has made a big bet on.
[02:05]
B
Absolutely. These are affluent millennials who love a good deal. They love their points. You know, it's almost we've written about people fighting at the dinner table of who gets to pay because they want the points. Think about the last time Matt used to have, and usually it's people avoiding putting that much money on their cards. But these are really travel savvy consumers. They get extra points for dining. They get this, they used to get a huge 100,000 point sign on bonus that was later cut in half to 50,000. And these are people who are not necessarily going to leave a balance on their cards every month they pay off their bills and that's because they are affluent and have the money to do it and they're savvy about their finances.
[02:44]
C
Is that a big problem? Are customers paying off their balances? They're not leaving much on the table.
[02:49]
B
It's definitely part of it. That's one of the ways that the bank can make money is the net interest income, and that comes from balances that consumers have month to month if they don't pay off the bill in full. One of the key junctures is actually about to occur in the next couple of days and that's when the renewal period after the first year starts begin. The card was launched in mid August of last year and so it'll be very interesting to see and we won't really know. We'll have to do reporting on it. This is not publicly available, but I know people at the bank are tracking and are eager to find out how many people will pay the $450 annual fee to get the card for another year if they're not going to get any sort of bonus sign on as they did for the first year. So that's this key point to see, you know, is the bank just giving away too much free money or has it really hit the jackpot of customers as it says it has?
[03:38]
C
I'm speaking with Emily Glazer of the Wall Street Journal and you're listening to youo Money Matters. Thanks for listening, everyone. Emily, the Sapphire reserve card has been a huge hit in the industry and I guess it's being looked upon, perhaps enviously by rivals.
[03:53]
B
Absolutely. Amex and Citi both have premium credit cards. That's what it's known as in space that has really been sort of swallowed by Chase Sapphire Reserve. Someone joked to me after our article came out that Amex CEO Ken Chenault must be smiling like crazy after seeing a story that Sapphire Reserve might not pan out as well as people have been saying. So it is really the envy of the industry. At the same time, JPMorgan executives have said and acknowledged that it won't make money right away. CEO Jamie Dimon at one point said, you know, it could take seven years and that certainly the acquisition cost for each customer has to be expensed over 12 months. He said the benefit comes over seven years. So it is a long term bet. But even to see that there are cracks in it are certainly something that competitors are happy about. To put it simply, it makes you
[04:49]
C
wonder why they're worried at this point. If it takes that long to see how it plays out.
[04:54]
B
It's a great question. And the truth is, from our report, we found out that there are certain models inside the bank that aggressively track different metrics. We've talked about some of them, you know, net interest income. And if the bank is making money off balances that are not paid, another one they're keeping a close eye on are renewal rates. Another one is just how customers are spending. And a lot of them are using the bonus point advantages for spending on travel and dining, which means JP Morgan has to foot the money to get customers, you know, those extra bonus points that they could then use toward travel. So there's been aggressive tracking on all the different metrics. And what we're seeing and what we're hearing rather is that it's not panning out the way the bank thought it would. So they've had to make adjustments. They've certainly cut down on the initial bonus. They've cut down on a certain annual travel credit that they give customers. It used to be that customers would get a $300 annual credit. So if they signed up in a certain year, they could get it for, you know, let's say you signed up in October 2016, you could get a 2016 credit and then also get one for 20. So it's both calendar years, they changed it to just being the card member year. So they've, you know, certainly cut back on different bonuses and perks. But you know, when the numbers aren't working out and when the economics have problems inside the bank, that's why they're nervous and that's where the concerns are. Even if it's a long term bet,
[06:20]
C
you write that customer renewal rates for premium credit cards can range from 60 to 90%. And upwards of 10% of cardholders tend to shop around looking for new rewards. Do you get the feeling that Morgan is worried that they may undershoot those numbers?
[06:35]
B
Oh, sure. I think that's a huge, you know, we don't really know what will happen since that's about to start, that renewal rate in the next couple of days. But absolutely, I mean, that is one of the biggest bets that a source told me. You know, are they giving away free money or have they hit the jackpot? The renewal rate will be a huge sign of that if customers see value in keeping the card without all these, you know, tens of thousands of bonus points that could equate to free flights and so on and so forth. So as you can imagine, I'm eagerly reporting and trying to find out as those renewal rates keep coming up, what the bank is seeing and hopefully. Stay tuned on that.
[07:15]
C
We'll have more from Los Angeles Wall Street Journal reporter Emily Glazer. Thank you very much for joining us.
[07:20]
B
Thanks, Charlie.
[07:21]
C
And that's your Money Matters. I'm Charlie Turner at the Wall Street Journal.
[07:24]
B
News on the go, whenever you want it, wherever you want it, the Wall Street Journal. Listen, ambitiously, access to affordable credit helps me pay my employees, but I don't really need it.
[07:37]
C
Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.
[07:46]
B
See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources
[07:51]
C
they need while increasing megastore profits. They deserve it, don't they?
[07:57]
B
Tell Congress stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

Summary4 min read

WSJ Your Money Briefing

Episode: Sapphire: Popular with Customers. Maybe Too Popular
Date: August 10, 2017
Host: Charlie Turner
Guest: Emily Glazer (Wall Street Journal reporter)

Episode Overview

This episode dives into the unexpected challenge facing JPMorgan Chase: their wildly popular Chase Sapphire Reserve credit card, designed to attract affluent, reward-savvy millennials, may be too generous for its own good. Despite its consumer popularity and significant industry buzz, the card faces profit issues as customers expertly extract value—often without providing the income JPMorgan anticipated. The conversation explores internal concerns at the bank, cost-cutting measures, and the broader competitive landscape for premium credit cards.

Key Discussion Points & Insights

1. The Cost of Popularity

JPMorgan is planning $200 million in cost cuts at the consumer banking unit, which includes the card business (01:12).
This move may reflect growing concern that the Sapphire Reserve card is costing more than it brings in, especially due to the generosity of its rewards.

“...the cost cuts of around $200 million at the consumer banking unit definitely can tell us a couple of things about how the business is going right now.”
— Emily Glazer (01:12)

2. Customer Profile: Affluent Millennials

The target audience—wealthy millennials—are maximizing rewards without carrying balances (02:05).
These consumers aggressively seek value, pay off their bills each month, and often compete to earn rewards points.

“These are affluent millennials who love a good deal. They love their points… These are really travel savvy consumers... who are not necessarily going to leave a balance on their cards every month.”
— Emily Glazer (02:05)

3. Profit Challenge: Low Net Interest Income

One critical bank profit source—interest on carried balances—is minimized when consumers pay in full (02:44).
The approaching annual renewal period becomes a crucial inflection point, especially without the initial sign-up bonus.

“One of the ways that the bank can make money is the net interest income, and that comes from balances...if they don’t pay off the bill in full... The renewal period after the first year starts begin... will people pay the $450 annual fee to get the card for another year if they’re not going to get any sort of bonus sign on?”
— Emily Glazer (02:49)

4. Industry Envy and Competitive Response

Sapphire Reserve’s success has dominated the premium card space, outpacing established competition from Amex and Citi (03:53).
Industry rivals are reportedly watching—with some even feeling a sense of schadenfreude—now that JPMorgan is struggling with the cost side.

“Amex and Citi both have premium credit cards... that has really been sort of swallowed by Chase Sapphire Reserve... Amex CEO Ken Chenault must be smiling... after seeing a story that Sapphire Reserve might not pan out as well as people have been saying.”
— Emily Glazer (03:53)

5. JPMorgan’s Long-Term Bet and Adjustments

CEO Jamie Dimon acknowledged the card may not make money immediately; payback could take up to seven years (03:53).
The bank is closely tracking a range of metrics: net interest income, renewal rates, and how much customers are exploiting travel and dining bonuses (04:54).
In response to unexpected costs, JPMorgan has reduced the sign-up bonus and tightened travel credits (05:34).

“What we’re seeing... is that it’s not panning out the way the bank thought it would... They’ve certainly cut down on the initial bonus. They’ve cut down on a certain annual travel credit...”
— Emily Glazer (05:34)

6. Renewal Rates: A Decisive Metric

Renewal rates for premium cards can range from 60-90%, but JPMorgan is unsure how Sapphire Reserve customers will respond without lavish new bonuses (06:19).
Upwards of 10% of cardholders regularly shop for new rewards, further intensifying the challenge.

“Are they giving away free money or have they hit the jackpot?... The renewal rate will be a huge sign of that if customers see value in keeping the card without all these... bonus points that could equate to free flights...”
— Emily Glazer (06:34)

Notable Quotes & Memorable Moments

On customer savviness:
“We’ve written about people fighting at the dinner table of who gets to pay because they want the points.”
— Emily Glazer (02:05)
On the industry’s reaction:
“Amex CEO Ken Chenault must be smiling like crazy after seeing a story that Sapphire Reserve might not pan out as well as people have been saying.”
— Emily Glazer (03:53)
On the stakes of renewals:
“The renewal rate will be a huge sign of that if customers see value in keeping the card without all these... tens of thousands of bonus points…”
— Emily Glazer (06:34)

Segment Timestamps

00:33 — Introduction to the episode, Chase Sapphire Reserve’s popularity and challenges.
01:12 — Emily Glazer discusses JPMorgan’s cost-cutting and the card’s unexpected expense.
02:05 — Deep dive into the behavioral profile of Sapphire Reserve customers.
02:49 — Importance of net interest income and impending renewal period.
03:53 — Competitive landscape and industry reactions.
04:54 — Metrics JPMorgan is tracking and recent changes in card perks.
06:19 — Discussion of renewal rate significance and future uncertainties.

Conclusion

This episode of "WSJ Your Money Briefing" offers an inside look at how a highly successful consumer product—Chase Sapphire Reserve—can challenge even the biggest banks if customers are too good at the game. As the renewal period approaches, JPMorgan faces a key test: can they keep the card both attractive for savvy users and profitable for the bank? Listeners are left awaiting the outcome, with the promise that continued reporting will track the results.

Loading summary

Transcript22 lines

[00:01]
A
This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day, but what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. Listen@schwab.com WashingtonWise.
[00:29]
B
This is yous Money Matters from the Wall Street Journal.
[00:34]
C
Welcome to youo Money Matters. I'm Charlie Turner in New York. The Chase Sapphire Reserve credit card has some pretty generous reward offers for customers, but apparently that, along with high demand for the Sapphire, has not made the card very rewarding for its issuer, JPMorgan Chase. The bank is looking to cut costs at the unit that oversees Sapphire, and company officials are wondering when and if the card will make for JP Morgan. Joining us from Los Angeles is Wall Street Journal reporter Emily Glaser. Emily, you write that JP Morgan wants to cut $200 million at this card unit. Is that an acknowledgement that the card has perhaps worked too well?
[01:13]
B
It's a really interesting case, Charlie, and I think the cost cuts of around $200 million at the consumer banking unit definitely can tell us a couple of things about how the business is going right now. What we know from our sources is that it's not directly the only there's multiple factors. When a bank as large as JP Morgan and a unit as large as its consumer banking unit, which by the way includes branches, cards, small business, a whole host of things decides to do mid year cost cuts like that. But it certainly seems suspicious to us, especially after hearing about the concerns inside the bank about how and if the Chase Sapphire reserve card, one of the biggest hits Chase has ever had, whether that will make money or not.
[01:55]
C
Well, you write that spenders are growing savvier about maximizing benefits and avoiding balances that pad the bank's profits. And these are the customers that JP Morgan has made a big bet on.
[02:05]
B
Absolutely. These are affluent millennials who love a good deal. They love their points. You know, it's almost we've written about people fighting at the dinner table of who gets to pay because they want the points. Think about the last time Matt used to have, and usually it's people avoiding putting that much money on their cards. But these are really travel savvy consumers. They get extra points for dining. They get this, they used to get a huge 100,000 point sign on bonus that was later cut in half to 50,000. And these are people who are not necessarily going to leave a balance on their cards every month they pay off their bills and that's because they are affluent and have the money to do it and they're savvy about their finances.
[02:44]
C
Is that a big problem? Are customers paying off their balances? They're not leaving much on the table.
[02:49]
B
It's definitely part of it. That's one of the ways that the bank can make money is the net interest income, and that comes from balances that consumers have month to month if they don't pay off the bill in full. One of the key junctures is actually about to occur in the next couple of days and that's when the renewal period after the first year starts begin. The card was launched in mid August of last year and so it'll be very interesting to see and we won't really know. We'll have to do reporting on it. This is not publicly available, but I know people at the bank are tracking and are eager to find out how many people will pay the $450 annual fee to get the card for another year if they're not going to get any sort of bonus sign on as they did for the first year. So that's this key point to see, you know, is the bank just giving away too much free money or has it really hit the jackpot of customers as it says it has?
[03:38]
C
I'm speaking with Emily Glazer of the Wall Street Journal and you're listening to youo Money Matters. Thanks for listening, everyone. Emily, the Sapphire reserve card has been a huge hit in the industry and I guess it's being looked upon, perhaps enviously by rivals.
[03:53]
B
Absolutely. Amex and Citi both have premium credit cards. That's what it's known as in space that has really been sort of swallowed by Chase Sapphire Reserve. Someone joked to me after our article came out that Amex CEO Ken Chenault must be smiling like crazy after seeing a story that Sapphire Reserve might not pan out as well as people have been saying. So it is really the envy of the industry. At the same time, JPMorgan executives have said and acknowledged that it won't make money right away. CEO Jamie Dimon at one point said, you know, it could take seven years and that certainly the acquisition cost for each customer has to be expensed over 12 months. He said the benefit comes over seven years. So it is a long term bet. But even to see that there are cracks in it are certainly something that competitors are happy about. To put it simply, it makes you
[04:49]
C
wonder why they're worried at this point. If it takes that long to see how it plays out.
[04:54]
B
It's a great question. And the truth is, from our report, we found out that there are certain models inside the bank that aggressively track different metrics. We've talked about some of them, you know, net interest income. And if the bank is making money off balances that are not paid, another one they're keeping a close eye on are renewal rates. Another one is just how customers are spending. And a lot of them are using the bonus point advantages for spending on travel and dining, which means JP Morgan has to foot the money to get customers, you know, those extra bonus points that they could then use toward travel. So there's been aggressive tracking on all the different metrics. And what we're seeing and what we're hearing rather is that it's not panning out the way the bank thought it would. So they've had to make adjustments. They've certainly cut down on the initial bonus. They've cut down on a certain annual travel credit that they give customers. It used to be that customers would get a $300 annual credit. So if they signed up in a certain year, they could get it for, you know, let's say you signed up in October 2016, you could get a 2016 credit and then also get one for 20. So it's both calendar years, they changed it to just being the card member year. So they've, you know, certainly cut back on different bonuses and perks. But you know, when the numbers aren't working out and when the economics have problems inside the bank, that's why they're nervous and that's where the concerns are. Even if it's a long term bet,
[06:20]
C
you write that customer renewal rates for premium credit cards can range from 60 to 90%. And upwards of 10% of cardholders tend to shop around looking for new rewards. Do you get the feeling that Morgan is worried that they may undershoot those numbers?
[06:35]
B
Oh, sure. I think that's a huge, you know, we don't really know what will happen since that's about to start, that renewal rate in the next couple of days. But absolutely, I mean, that is one of the biggest bets that a source told me. You know, are they giving away free money or have they hit the jackpot? The renewal rate will be a huge sign of that if customers see value in keeping the card without all these, you know, tens of thousands of bonus points that could equate to free flights and so on and so forth. So as you can imagine, I'm eagerly reporting and trying to find out as those renewal rates keep coming up, what the bank is seeing and hopefully. Stay tuned on that.
[07:15]
C
We'll have more from Los Angeles Wall Street Journal reporter Emily Glazer. Thank you very much for joining us.
[07:20]
B
Thanks, Charlie.
[07:21]
C
And that's your Money Matters. I'm Charlie Turner at the Wall Street Journal.
[07:24]
B
News on the go, whenever you want it, wherever you want it, the Wall Street Journal. Listen, ambitiously, access to affordable credit helps me pay my employees, but I don't really need it.
[07:37]
C
Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.
[07:46]
B
See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources
[07:51]
C
they need while increasing megastore profits. They deserve it, don't they?
[07:57]
B
Tell Congress stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.