Posted by William Charles on August 28, 2018
Credit Cards

Published on August 28th, 2018 | by William Charles

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Why Did Chase Introduce The 48 Month Rule On The Chase Sapphire Reserve/Preferred? (CSR Came Out ~24 Months Ago)

Yesterday Chase introduce a new rule on the Chase Sapphire Reserve and Chase Sapphire Preferred stating that you’re not eligible to sign up for the card if you’ve received a sign up bonus on either card within the last 48 months. Previously you were restricted if you received a sign up bonus within the last 24 months. A few readers asked why such a rule might have been added and the answer is relatively simple. The Chase Sapphire Reserve card was introduced on August 22nd, 2016 (although it was available in branch on the 21st and via a leaked link before that).

That means a lot of existing cardholders have now had the card for 24 months and would be eligible to cancel the card and then sign up again to get the bonus (assuming they were eligible under the Chase 5/24 rule). Chase is still struggling to recoup the costs involved with acquiring customers, especially those who signed up early when the bonus was 100,000 points. They have long pointed to the high retention rate of 90%+ and they fact they would be able to convert Sapphire Reserve customers into other product holders that are more profitable (e.g home loans/investments). They just launched Sapphire Banking in an attempt to convert Sapphire Reserve cardholders to deposit account holders but with no sign up bonus it’s hard to see that gaining much traction. They also launched You Invest which offers fee free trades in the first year.

Chase has always been unusual in that they restrict when you’re eligible for the sign up bonus based on when you last received the bonus. American Express simply restricts you to one bonus per card per lifetime & Citi bases it on when you last opened/closed a card within that brand.



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Drivesabrowntruck
Drivesabrowntruck

Completely agree, but it is intresting these new rules are targeted at churners in particular. This new rule coupled with the one sapphire rule per person really also limits redemption value of UR points, paying the ongoing AF is now required, vs optional where you could wait for a year where you’d utilize the 1.25/1.5 value, storing your UR on a non annual fee card until then

Franholio
Franholio

You can still upgrade/downgrade cards at any time without resetting the 48 month clock.

Yoni
Yoni

Hmmm I think it might have something to do with this:
“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.” Dragged from seat 1A on the TPG …err HT to TPG.

I imagine it has to do with actuarially projections and reality, I think it has more to do with Millennials have skewed redemptions and card benefits or automated use, not a slam against Millennials . I think they were projecting redemption patterns to follow Gen-x, Boomers, and silent gen card users, bank miles/points long term and low redemption rates.

Just my .02

MoreSun
MoreSun

Millenials kill EVERYTHING!!!… ROFL

Yoni
Yoni

Lol not necessarily always a bad thing (but sometimes it does suck), I think If Napster had been released years later, it might have exploded and ended up as a FAANG stock. I think Millennials are prime force movers as Disruptors and some times that leaves destruction in its path.

Some millienials got to learn ethics from the “No Executive Jailed” bankers during the Great recession”.

I think previous generations got burned when they expected big corporations to act ethically and would have frowned on churning – and considered it abusing the corporations/systems generosity (lol).
They would have frowned on sharing passwords or perks.

https://www.cnbc.com/2018/08/19/millennials-are-going-to-extreme-lengths-to-share-streaming-passwords-.html

Disruptor
Disruptor

Sharing passwords is stealing content for free. So you’re saying millennial’s didn’t actually learn any ethics at all?

flyboy
flyboy

Pretty much.

Lrdx
Lrdx

We had an excellent role model.

Chucks
Chucks

It’s certainly not stealing content. Stealing would deprive someone else of the thing- ie stealing a bike deprives the owner of use. This is merely unauthorized access.

Trevor
Trevor

Unauthorized access is still stealing. It’s depriving the owner of the fruits of their labor (payment for goods/services provided). Disclaimer: about to go watch HBOGO using someone else’s login 🙂

Max
Max

It’s not stealing.

JB
JB

Of course it is stealing. Back in the the old days it was having an unauthorized HBO filter for cable, or splicing into your neighbor’s cable. Now it’s downloading a hacked version of Photoshop or sharing passwords. Either way it’s taking someone’s intellectual property without compensation.

HappyInAZ
HappyInAZ

Of course it’s stealing…..you are taking something for free when you should be paying for it

Froide
Froide

Multiple streaming content providers have gone with the flow by offering plans and features that accommodate shared use, e.g., Amazon Prime’s shared plans (which include Amazon Instant), Netflix, and SlingTV.

Brandon
Brandon

If that is the case. Chase saw people redeeming rewards as a quick cash in before closing the card. A way that makes sure Chase can’t claw back anything.

Won
Won

Maybe it had to do with Korean Air leaving. They figured lots of people might cancel with Korean Air’s departure. But maybe not so much if they made it much harder to obtain the sign up bonus. Yet, the fact that they still don’t have a once in a lifetime rule gives them appeal compared to some competitors.

Jags
Jags

yea, no.

Elmer
Elmer

-1

Norm
Norm

The CSR is the first card, that I can remember, that was heavily promoted by bloggers at launch (in lieu of more traditional advertising) and was a gateway card for a lot of new folks interested in miles and points. Personally, many of my friends who were hesitant to sign up for new cards asked me whether or not they should sign up for the 100k points, and then started reading blogs, etc. While Chase has justified its higher-than-expected losses, the reality is that CSR customers are probably some of the most knowledgeable users of credit cards, especially among luxury card users, when it comes to points and benefits. Bean counters at Chase probably realized that a disproportionate number would take advantage of the 24-month limitation and sign up again for the CSR, leaving them with additional millions in liabilities without any additional business. The question is whether Chase sees this as a phenomenon limited to its Sapphire products and the CSR’s specific 100k launch, or if they think that churning is a broader problem across its card issuing business. I’d like to think that for co-branded cards, 4 years is long enough for people’s life circumstances and travel preferences to change that its partners would be satisfied with the limitations of the 5/24 rule to not extend this new restriction to its cards.

Dino P
Dino P

I completely agree. Before the CSR I was a non-informed CC user with the occasional redemption of points for some things. Reading this and the many other blogs have made me a more informed and strategic user of credit cards and points. I now always will calculate if the price per point is worthy of a redemption or just pay for it outright.
It’s an unfortunate setback but I know that we are all a very resourceful bunch and this too shall be overcome 🙂

Ian
Ian

Does any1 know how much money Chase paid for each applicant who applied thru bloggers’ affiliated link for the CSR?

Dan
Dan

it depends on the blogger, generally those contracts are negotiated on an individual basis. bloggers who drive more traffic get higher commissions. wouldn’t be surprised if it was $300+/application for some bloggers

ItsaMeMario
ItsaMeMario

Pretty sure most partners don’t care about churners at all (because they sell their points to Chase at a healthy expected profit), and would just as soon Chase drop 5/24 as well.

Norm
Norm

They care about them indirectly if their card issuing partner is forced to buy lots of miles for which it sees no economic benefit. Eventually, that will lead to a lower per mile price or a ceasing of business altogether. My impression is that 5/24 probably eliminates most churners on Chase’s end without affecting the types of customers with whom co-brand partners are hoping to develop loyalty. A 48-month limitation, on the other hand, seems like too long a time horizon – e.g. people’s jobs and travel needs change – and might drive away the customers they’re hoping to build a long-term relationship. Hopefully enough so that co-brand partners balk at any Chase attempts to extend this new restriction to other cards.

Yoni
Yoni

Yep it is a pure profit center for them that they can write down the seats/miles liabilities by changing reward levels or systems or reducing award seat availability.

I
Was reading this earlier on Business insider:

Card income dropped 25% in the past two years, from $5.9 billion in 2015 to $4.4 billion in 2017, while spending by Chase’s credit-card customers increased 26%, from $496 billion to $622 billion.

Meanwhile, Chase’s rewards liability – which represents the bank’s estimated cost of reward points earned and expected to be redeemed – increased from $3.8 billion at the end of 2016 to $5.5 billion midway through 2018, the most current tally. The bank did not start reporting or breaking out costs associated with its rewards liability in regulatory filings before this year.”

I wonder if this includes the $380 million UR redeemed earlier this year.

I do think that UR/MR are more liquid and valuable than miles with an airline, if we dealt with another 9/11 event and the impact it had on the economy and the airline industry (I was booked to fly 9/11/01 and was headed to the airport, and flew on a regular basis – I digress – but flying in the 80-90s was far more enjoyable (except the smoking).

Companies will find a way to plug the holes leaking the profit.

Froide
Froide

RE: “The question is whether Chase sees this as a phenomenon limited to its Sapphire products and the CSR’s specific 100k launch, or if they think that churning is a broader problem across its card issuing business”

So far, I think it’s limited to Sapphire products. Rationale:
Chase offers a 100,000 UR sign up bonus for the Business Ink Preferred card for several months each year, beginning with Small Business Week. AFAIK, there’s no 48 month restriction for that card.

Jags
Jags

So the real question is I just blew my UR load and have no points currently. My AF will hit on next statement. Worth keeping or dropping CSR? I’m basically cost even right now having paid 2x AF but received $900 in travel credits.

I like UR for Hyatt and United redemptions but paying $0 AF and using Blue Business Plus and switching to Marriott wouldn’t be awful. I could still go around and get sign up bonuses elsewhere but would need to switch my airline. Sucks as a EWR flyer. Decisions decisions.

Matt Katakis
Matt Katakis

I think it really depends on how much you value the 3X on restaurants/travel. Knowing you’ll get another $300 in travel credits, can you justify the additional $150 for 3X?

Preshit
Preshit

Also, any other UR points that you earn through CF/CFU could be used for transfer partners or even chase travel portal. Consider the value of at least 1.5x multiplier on all UR points that you earn.

Scott
Scott

I would say it is not worth keeping given all of the other credit cards out there with good sign-on bonuses. You are always better off using organic spend to meet MSR over getting 3x points. Downgrade your CSR to a CFU or Freedom and if you miss it you can always move it back up.

Calvin
Calvin

When does the 48 month timer kick-in? After account closure, at card signup, or at time bonus posted?

TomT
TomT

Please re-read the first sentence of Doc’s article

FlyingNinja
FlyingNinja

For two persons scenario, is it still worth it to stay with the 5/24 Chase strategy?

Stinger
Stinger

Probably 100 varying opinions on this. I put a very high value on Southwest and Hyatt points because it allows my family of five to travel affordably. We always have a companion pass active and plenty of points to fly multiple trips a year and stay at a Hyatt at least one a year for an extended stay. So I believe it does make sense even if some cards go to 48 months. If they all went to 48 months some day, then I’d have to re-evaluate my strategy.

Jiasus
Jiasus

Definitely not you realize chase is not the only bank issuing credit cards right? They also have bunch of cards that are not 5/24 snap those cards now before these banks put more rules in

Elmer
Elmer

Depends upon whether you think Chase will change the 5/24 rule again (or implement other rules) before you actually reach the ‘finishline’.

LAXJeff
LAXJeff

I figure they are weeding out the churners so they retain more card holders and lower their cost of having to pay out sign up bonuses. This is not a surprise, I just hope the other banks don’t follow suit.

mathkilz
mathkilz

CSR isn’t profitable, that’s why they keep trimming around the edges without coming out and admitting that CSR isn’t profitable and never will be. It’s an unsustainable product in an era where customers have 100% visibility. The math doesn’t work in Chase’s favor.

Signup bonuses+Rewards cost is exceeding AF+swipe fee+interest.

For banks who do not operate their own card network (ie they depend on Visa or MC), a card like CSP or Citi Premier is about as benefit-rich as the card can get and still be profitable for the bank.

Every quarter that passes, Chase implements some new cost cutting measure in its card portfolio and we should expect that to continue so long as they are paying out 3% on travel and dining to a group of customers who aren’t revolving balances.

David
David

If they are trying to weed out churners, WHY do they promote posting on credit card churning websites in the first place?

TPG is (ultimately) a churning website. It’s a crappy one, but it still emphasizes how to use (and abuse) cards. It tells them how to strategize and mentions things like 5/24. I’m ultimately hoping that this simply comes and bites them in the ass. Something tells me their revenue will take a dip one day and they will have to open up to churners again.

Christine
Christine

If you notice, TPG is attempting to diversify with categories like “family” and promoting products related to travel, as if we aren’t savvy enough to do our own research on those things elsewhere. So is MMS doing the same thing. They all see the handwriting on the wall that the churn-promoting has tipped over the sweet spot in making them $ and the banks are backing away. At least Doc is being straight up and giving this info the place it deserves, instead of burying it under articles about baby carriers and favorite airport food. Respect to Darius who left the whole game with his dignity when all this became obvious.

Matt Katakis
Matt Katakis

Good call. MMS was the first place I found many years ago. I thought it was a better version of TPG because it seemed purer. I did not like the new direction they took and ultimately unsubscribed, coincidentally around the time Daraius left. Thank God for Doc.

zingzangzung
zingzangzung

It’s pretty obvious, ain’t it?

Q: Why Did Chase Introduce The 48 Month Rule On The Chase Sapphire Reserve/Preferred?

A: Because bloggers.

cy1111
cy1111

Chase has shut down many people’s account in this year even though they are not churner or MSer. I am quite interested that If the new rule means Chase stops doing this any more?

Credit
Credit

Shutdown based on what? I think they just make cost/ benefit analysis and shutdown money losing cards.

fll
fll

The poster is referring to shut down by Chase – i.e. severe the relation with the customer.
No, many such shutdown has nothing to do with owning Chase cards or doing MS on their cards, but rather looking at how many unsecured credit lines said customer has, with all banks, not just Chase.

if you have no idea about what Shut Down means, suggest you do some research so you learn not to be a number of that group. (yes, there are some do’s and in particular don’ts to avoid become a stat if you still want to be Chase customer.)

cy1111
cy1111

It seems applying for a new card (a new HP by Chase) or getting a fraud alert (uncommon spending, especially in large amount) will be the trigger for shutdown. The problem is that no one knows what the exactly policy is and some people can get reinstated but some can not. This random and insane shutdown system makes a lot of people (like my friends and me) stop applying for new Chase card; and I thought this “fear” is enough to keep churner from churning CSP/CSR. Now this newly added strict rule makes me feel that Chase may fix their shutdown system already; one example is that we have not heard any shutdown story from the last batch of Ritz card application.

fll
fll

It triggers an Account Review which would let Chase sees HOW MANY accounts you have with ALL issuers and the aggregated credit lines – compared to your stated income / profession / age group… all the demographic data.

If you can somehow convince Chase why you have owned so many different cards and why you have such spend pattern, then not only you are reinstated but even received an apology letter.

There is no fast rules, especially none for the community that the bloggers targeted, because suffice to say, most would not be able to provide convincing reasons on what Chase has questions about.

Unlike the Hyatt and IHG, Ritz has a high AF plus the travel credit is a phone-in approval process. Complete different animal comparing to the low end co-brand cards.

You would be fooling yourself about Chase has finished its house cleaning act which is no more than an ongoing risk assessment but in a much more aggressive and rigorous manner.

Credit
Credit

If you are referring to breakout risk then in think having a job with a sell known company or a in the money house or retirement plan should mitigate it.

I am worried that chase uses it as an excuse to shutdown money losing accounts since they probably lose money on churners.

fll
fll

Very recently someone in the FT 2018 shut down thread has posted he has 120K cash in Chase checking/saving accounts for several years and just recently been shut down.

Credit
Credit

I read the megathread. Many/ most/ all accounts got reinstated.

Credit
Credit

How many freedom cards can you have?

Elmer
Elmer

One for each fake ID or passport.

Bill M
Bill M

I currently have 2 Freedoms. One I’ve had for many years and the other was a product change from a CSP about a year ago.

Pnut
Pnut

Sigh. Been telling everybody to get CSR even though I’ve been unable to and this means I’d have to wait a year and a half now (shouldn’t have been slow to downgrade CSP and apply for CSR a month later). Might have to just cut my losses and just upgrade at this point since I do think CSR > CSP

john m
john m

Money is the root of all evil.

ed
ed

Therefore points/miles/cb from spending (which are just discounts on purchases/aka rebate) are okay! 😉

fST
fST

Actually, I believe it’s the love of money is the root of all evil.

Cliff
Cliff

This doesn’t affect product changes, does it? For example, if I downgrade my CSP to a regular Sapphire, then want to upgrade it later to the CSR (no signup bonus involved, of course), would Chase allow that?

David
David

no Data points yet, but they have no restrictions on product changes other than needing 10k CL to get CSR, and have the card open for 12mo (due to CARD act/law). I don’t imagine they’ll target product changes, as they’re not giving away a sign-up bonus, and a very small amount of people utilize PC’s.

Barry
Barry

I just have a feeling that Chase is going cut the travel credit on the Sapphire Reserve sooner or later. I bet that it gets slowly reduced in increments ($300 to $250), ($250 to $200), etc .

Charlie
Charlie

That would drive me away. My three criteria for keeping CSR are: net annual fee of $150, 3x points for travel/dining, and ability to transfer those points 1:1 to United. If they change any of those three things, I’m gone.

ed
ed

I doubt that. That would lose that 90% retention they have on this card. This is a ‘profitable’ card to them because it brings customers into other Chase offers, investments and so forth. It’s all about keeping people in a platform. It was a success. Many of us continue with it and are afraid of canceling due to the 5/24 rule, and then not getting approved again.

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