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When we talk about credit card points and miles, the first issuers that come to mind are American Express and Chase. While there are a lot more issuers in the game today than there were ten years ago, there are compelling reasons why Chase and American Express travel rewards seem to dominate the conversation. In this post/video, we’ll explore why these two issuers are in the forefront and why it matters to travelers in this hobby.
Focusing on American Express and Chase
A question that I often receive is “Why don’t you recommend more US Bank and Citi cards?” The primary reason is that I usually don’t like to review cards that I don’t currently have or have had in the past. While I could review the benefits on the website, I think it’s helpful when I can show how things work on the backend and give first-hand experience on the cards. Maybe I’m too picky, but I prefer to show screenshots of the interface and even what the card looks like in person.
There’s also a bigger question that comes to mind: “Why do most of us gravitate toward American Express and Chase in this hobby?” That’s a more complicated and interesting question. It’s also one that may help answer the previous question.
Why Chase and American Express travel rewards dominate the market
I want to start out by saying that this post/video isn’t meant to put down other issuers. There are a lot of compelling cards on the market right now. Also, there is no “one size fits all” strategy when it comes to cards and issuers. However, we can’t ignore that American Express and Chase continue to dominate the credit card rewards space.
Below are the reasons why these two issuers are the key players in the award travel space.
1. Longer history in the game:
American Express – Helping travelers since the nineteenth century
American Express has a rich history when it comes to travel. They started as a freight forwarding company in 1850. The company then innovated the travel space by offering traveler checks in 1891. By 1895, American Express had offices around the world to help travelers, especially those who found themselves stranded. Even in 1914, American Express was credited with helping Americans who were stranded in Europe due to World War I with getting themselves and their belongings home.
In 1958, they introduced their first charge card, followed by the corporate charge card in 1966. Since then, they’ve built a portfolio of cards that earn Membership Rewards points and even featured celebrity endorsements.
For those of you who grew up in the 1980s and 1990s, you probably remember the American Express ads featuring the slogan, “Don’t leave home without it.” American Express was successful at marketing their brand as essential for travelers, but they also created a sense of luxury and exclusivity that elevated perception of the brand.
Chase – Riding the wave after the Great Recession
Chase introduced their Sapphire and Sapphire Preferred cards in 2009. At the time, they were the underdog entering to battle the premium rewards offered by American Express and the more popular cashback cards that existed at the time. They also tried to create a sense of luxury and exclusivity, and surprisingly, the rewards offered at the time were nowhere near as lucrative as they are now. But you have to also factor in what was happening in 2009. The US was starting to recover from the Great Recession. With household incomes starting to stabilize again and the job market on the rise, it seemed like the perfect time to target new customers looking for more rewards and perks.
It’s this history and experience that helped American Express and Chase become the two dominant players in the market, and it is one of the big reasons that they continue to have the strongest presence in award travel.
2. Focusing on specific customer segments:
American Express – Focusing on Corporate Travelers
One of the ways that American Express expanded their presence was their focus on business travelers. Many in corporate America have had an American Express Corporate card issued to them. In fact, when I joined my first consulting firm after grad school, I was issued an American Express Corporate Card for my business travels. What I didn’t realize at the time was that I could access the points that I was earning on the Corporate card if I had personal cards that were also linked to my account. I’ve heard that a lot of companies have restricted this practice now. Though at the time, it encouraged me to apply for and use American Express cards in my personal life as well.
Chase – Appealing to millennials looking for an alternative
Chase, on the other hand, hasn’t had as strong of a presence in the corporate space. However, their Sapphire Preferred and Reserve card had a strong appeal to millennials. In fact, when the Sapphire Reserve was released, there were a lot of influencers who were unboxing their cards, which added to the allure. It also didn’t hurt that the card included a 100,000-point welcome offer, which created a frenzy. The high volume of applications even caused a shortage of metal cards, resulting in Chase reporting a financial loss.
Whether it was intentional or not, Chase’s Sapphire brand became a hipper and more modern alternative to American Express, which traditionally focused on a more mature, professional, and wealthier demographic.
3. More established travel partner relationships:
One of the big factors driving the growth of American Express and Chase travel rewards is their relationship to other travel companies. Both companies have established exclusive and non-exclusive relationships with some of the largest travel brands in the airline and hotel space. While Citi and Capital One have also gained a lot of ground in their partnerships, Chase and American Express continue to maintain and grow these partnerships. Having a diverse set of partners gives their programs strength since cardmembers are able to find more options (e.g., partner flights) to redeem their award travel.
4. Multiple card options:
The traditional way of earning points and miles was to be loyal to a specific brand in order to gain points. Both American Express and Chase offer several credit cards that support their flexible points program. This gives cardmembers the ability to earn points at a faster pace.
Other issuers like Citi also have multiple cards that earn flexible points too, but Chase and American Express still have the upper hand when it comes to multiple card options. It’s the reason why you’ll often hear people in this hobby reference a “trifecta” or equivalent card set-up.
It is essentially a combination of cards that can earn you points through a variety of bonus categories. This then allows you to earn more points in your award program currency.
5. Committed to the game:
There’s a sense that American Express and Chase are in the travel rewards community to win. This is apparent when you look at the way that both companies have tried to innovate to capture customers for the long-term.
As I mentioned earlier, Chase posted a loss after they introduced the Sapphire Reserve. They underestimated the popularity of the card, but rather than cutting it off from their lineup, they’ve kept it open for new applicants while reducing the welcome offer and stripping some of the non-essential benefits. Of course, they also increased the annual fee in early 2020, which angered a lot of folks in the community. I was also disappointed by the annual fee increase, but after doing the math, the card still seems to provide value even using fairly conservative numbers in my assumptions.
American Express has constantly evolved their lineup of charge cards. Specifically, we saw the revamp of the Gold Card in 2018 and the new Green Card in 2019. American Express has also added more traditional credit card products to their lineup that earn Membership Rewards points.
Committed to keeping core travel benefits
Both American Express and Chase have also been less aggressive when it comes to cutting back cardmember benefits.
For example, in September 2019, Citi cut several of their key travel benefits on their cards. From a numbers perspective, it probably didn’t make sense for Citi to continue to offer these benefits due to low usage. This likely didn’t affect casual users, but it alienated the more hardcore fans of their ThankYou Rewards program. This group likely travels more frequently and relies on these benefits. Also, the Citi Prestige, which is a competitive premium travel rewards card, has been unavailable at times for new applicants. The card also had some of its key and unique benefits removed when it was relaunched in early 2019.
Updating other benefits and credits
That’s not to say that Chase and American Express haven’t cut their benefits at all. For example, The American Express Priority Pass benefit on the Platinum card used to include the restaurant credit but no longer does, though one could argue that the larger network of lounges included with the card makes up the difference.
On the Chase side, the Sapphire Preferred originally provided a yearly dividend of 7% on all points earned at the end of the year. Though that benefit was removed shortly after the card’s release. Also, while Chase recently increased the annual fee on the Sapphire Reserve, they didn’t take away any of the benefits. Instead, they added new benefits, which many felt were not worth the increase in the annual fee.
Issuers using “bait and switch tactics”
While other issuers are often coming out with generous rewards structure and perks, I view them with a little bit of suspicion. Many of us have seen cards with rewards that seem “too good to be true” only to have that sentiment confirmed when the rewards are changed. Again, the first thing that comes to mind is the fourth-night-free perk on the Citi Prestige card. That perk continues to be more and more restricted. This has annoyed many in the travel community who shifted their card set-up to maximize this benefit.
This all ties back to the original question that I posed at the beginning—“Why don’t you recommend more cards like the US Bank Altitude Reserve or Citi Prestige?” It’s because I’m not convinced that either issuer is as committed to the game as American Express and Chase. That may change in the future though. It’s healthy for there to be more competition in this space.
Though for now, if you’re into the points and miles hobby, it’s hard to ignore American Express and Chase and their influence and history in the award travel space. From my perspective, I feel more confident using and recommending their credit card products since they seem to be committed to travelers.
What do you all think of American Express and Chase? Do you agree or disagree with my assessment that they dominate the travel rewards space?
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