New Sapphire Reserve Credit Card May Cost Chase $300 Million in Profits
JPMorgan Chase’s Chief Executive Officer Jamie Dimon says the company’s new Sapphire Reserve credit card could reduce the bank’s fourth quarter profit by $200 million to $300 million.
“The card has been doing great” and was embraced by consumers before the bank did any marketing, Dimon told investors at a conference in New York. “Now we have to account for acquisition cost in that business.”
Chase introduced the card in August and offered new customers 100,000 points when they spent $4,000 in the first three months. The points, which are worth about $1,500 in travel when booked through Chase’s website, increased the card’s popularity so much that the bank temporarily ran out of the metal needed to make them–despite the card’s $450 annual fee.
Even though the card is highly sought-after, some analysts believe JPMorgan will not break even on its investment in the card for another 5 1/2 years, according to Bloomberg.
“Lucrative sign-up bonuses give an issuer an opportunity to acquire a large number of customers in a short period of time, though we question whether the type of consumer this attracts leads to a less profitable card product in the long run,” reported Bernstein analysts, led by Kevin St. Pierre and John McDonald.
Despite this, JPMorgan, the largest credit card lender in the United States, is expected to post $5 billion in profits this quarter.