Costs and bots lead card issuers to cut some benefits
Price protection, travel insurance, extended warranties among the perks fading away
Writes about credit card technology and savvy card use
Discover cut five credit card benefits in February, Chase announced some perk cutbacks in April, and Citi detailed scaling back some of the perks on its cards in late May.
For some rewards card holders used to an array of free perks and benefits, this is the spring and summer of discontent.
What’s behind the cutbacks? Cost-cutting. With profits pinched by expensive rewards programs and rising delinquency rates, card issuers are trimming back other benefits, especially costly or less-popular ones.
“These actions are indicative of management’s recognition of the inevitable rise in costs,” says credit card industry analyst Robert Hammer, founder of R.K. Hammer & Card Knowledge Factory.
Marc Bellanger, senior strategy director at payments industry marketing agency Merkle, says legacy benefits such as extended warranties aren’t as popular as they once were.
“At one point in time, they were important differentiators,” Bellanger says. “Over the last decade or so, the conversation has evolved quite a bit. Now the conversation is more about rewards points, online tools and the digital experience. For travel cards, it’s more about the concierge benefits.”
For example, more travel rewards cards now offer reimbursement for TSA Precheck or Global Entry, and that trend is likely to continue, Bellanger says. There may be a tradeoff of less-used benefits for more in-demand and sought-after perks.
“I think that issuers are seeing there’s a way here to save a little bit of cost by eliminating benefits that customers don’t really use and don’t see much value in anymore,” Bellanger says. “Discover was clear in saying customers aren’t using these benefits. Why are we going for these benefits when customers don’t use them or value them?”
The credit card benefit cutbacks
Here is a recap of changes with Discover, Chase and Citi card benefits:
Discover ended five benefits that it said were little used, effective Feb. 28, 2018. The benefits cut were purchase protection, return guarantee, extended product warranties, auto rental insurance and flight accident insurance.
In an emailed statement, Discover said it “will continue to offer and invest in the many free benefits in which Discover cardmembers find the most use and value, including price protection, 24/7 account monitoring, our $0 fraud liability guarantee on unauthorized purchases ... FICO Credit Scorecard and our recently launched Social Security number alerts.”
The United MileagePlus Explorer card dropped price protection and return protection on June 1, 2018. Trip cancellation/interruption coverage also was reduced. On June 1, the all-new United Explorer card launched with a sweeter sign-up bonus and some new benefits, including a $100 fee credit for TSA Precheck or Global Entry.
Chase spokeswoman Mary Jane Rogers has previously said Chase evaluates card benefits and tries to come up with the right mix. “We’ve been looking at these things pretty hard … some benefits end up not being as valuable.” That was the sort of evaluation that resulted in dropping price and return protection for the United card, she said.
Chase Sapphire Reserve cardholders will lose price protection on Aug. 26, 2018, which also is when Priority Pass Select access will be limited to two guests per visit, according to notifications Chase has sent to cardholders. Previously, there was no limit on the number of guests. Cardholders will be charged $27 for each additional guest. Reserve cardholders also will no longer earn 3X points on travel purchases that qualify for the $300 annual travel credit.
Citi Price Rewind changes coming July 29: Maximum benefit per item will be capped at $200 instead of $500, and the maximum benefit per calendar year per account will be capped at $1,000 instead of $2,500.
For example, trip delay coverage for Prestige cardholders will kick in after your trip is delayed six hours instead of three. Trip delay, cancellation and interruption protection, lost baggage protection and travel and emergency assistance will no longer cover traveling companions, just immediate family. Maximum worldwide car rental insurance coverage will be reduced to $75,000 from $100,000. Return protection will shift from 120 days to 90 days and the annual reimbursement will be capped at $1,500 instead of $2,500.
The Citi email to Double Cash cardholders notes that changes include the end of roadside assistance dispatch service and travel and emergency assistance benefits, and worldwide car rental insurance will no longer cover charges or expenses for the loss of use of the rental car, rental agency fees or taxes.
Bots put price protection on steroids
One theme to the Chase and Citi cuts is either the elimination or scaling back of price protection programs. When card issuers first offered price protection, the customer had to do the legwork of tracking prices and proving there was a lower price, an executive at a major card issuer told Business Insider.
However, bots, which track prices and file price protection refund requests, made the process simpler for consumers and more costly for card issuers.
The Earny app, for example, offers “price protection benefits for all Chase and Citibank cards that offer this policy.” Earny also cover Mastercards from Capital One, U.S. Bank, Barclays and Bank of America.
Note that when cardholders did the legwork, they receive (or received) the full refund amount. The bots usually take a cut.
“Earny doesn’t take any money until he gets you back money,” the website says. “He keeps 25 percent of the money he gets you back.”
Paribus, one of the price protection bots, was bought by Capital One, and since September 2017, it is free. Paribus users get all of their refund.
Economics driving benefit cutbacks
With all of the recent changes, is this a sign that the era of generous credit card benefits is ending?
Not necessarily, but Bellanger says economic factors are definitely at play.
“When you look at the broader credit card environment, interest rates are going up and loss rates are creeping up,” he says. “Cards have been really profitable for banks, but margins are getting squeezed by higher interest rates and higher loss rates, so they’re looking for a way to maintain the profitability of their card programs.”
Hammer says card issuers may be girding for a possible recession. “We are now staring at over 10 years since the last one,” he says.
During a recession, card issuers face higher lending costs, along with more delinquencies and charge-offs. Cutting back benefits “is one way – among others to come – to prepare for a recession by paring back wherever they can,” he says. Other changes will depend on when and how a recession unfolds.
Hammer notes that these changes, particularly in the case of the Chase’s United MileagePlus Explorer card and Citi’s Prestige card, sometimes apply to certain segments of the card issuers’ portfolio, not the entire portfolio.
“I don’t think they’re going to do this en masse to every account holder,” Hammer says. “They’ll triage it by a particular segment.”
Banks must notify cardholders 45 days prior to significant changes to terms and conditions taking effect, under the Credit CARD Act of 2009. The email about the Citi Double Cash changes starting July 29 is an example of this advance notification.
Rewards card holders with good credit always – regardless of the 45 days’ notice – can switch issuers and cards if they don’t like changes to card benefits and perks.
Chances are, Hammer says, every time you go to your mailbox you will find an issuer that isn’t making changes to card benefits – at least for now.
- How to use hotel birthday bonuses and credit card perks – If you have a birthday coming up, you're eligible for countless hotel and travel perks. If you have a co-branded credit card or are part of a hotel loyalty program, you can save even more ...
- These low-maintenance cards make it easy to earn rewards – These five low-maintenance no-annual-fee cards have no annual fee and require little or no work to earn steady rewards ...
- Sports fans, take note: Some cards get you discounts, access – Some credit cards cater to sports fans with ticket discounts, jersey insurance or access to exclusive suites ...