NEW YORK—Credit unions competing in the rewards credit card space received some sobering news recently from Jamie Dimon about what it’s going to cost to attract and keep cardholders in this market.
Dimon, CEO of JPMorgan Chase, said Chase’s new Sapphire Reserve credit card will reduce the bank's profit by $200 million to $300 million in the fourth quarter. According to analysis by Bloomberg, Chase won’t break even on its investment in the Sapphire Reserve card for 5.5 years.
As CUToday.info has reported, major card issuers are ramping up their offers, willing to pay up and drop profitability to win with rewards cards.
"The (Sapphire Reserve) card has been doing great" and was embraced by consumers before the bank did any marketing, Dimon said recently during an investor conference in New York, Bloomberg reported. "Now we have to account for acquisition cost in that business."
JPMorgan introduced the card in August with a 100,000-point sign-up bonus for customers who spend $4,000 in the first three months. The points are worth $1,500 in travel booked through Chase's website, Bloomberg noted.
As CUToday.info reported, the Sapphire card, which comes with a $450 annual fee, was in such demand shortly after the launch that the Chase temporarily ran out of the metal it uses to make them.
JPMorgan, the biggest U.S. credit card lender, is expected to post about $5 billion in profit this quarter, according to the average estimate of analysts in a Bloomberg survey.