It’s official. We’ve entered the golden age of credit card sponsored perks. Maybe “platinum” age would be a better term given that Amex was an early adopter of this approach with their Platinum cards. That said, I think that Capital One may have been first when they partnered with Uber in 2016. Later they partnered with Hotels.com to offer 10X rewards for certain cards. Both promotions are in the past. Capital One may have been first to the party*, but I believe that Amex was the first card issuer to go all in. When they increased their Platinum card’s annual fee from $450 to $550, they added up to $200 per year in Uber credits and later up to $100 per year in Saks Fifth Avenue credits. And thus, the platinum age of sponsored perks began.
* I have no doubt that other card issuers offered sponsored perks years before Capital One, but this is an “on my mind” post, not an “I researched the heck out of this post” so cut me some slack.
Win, win, win?
In ideal situations, sponsored perks can be a win-win-win. I don’t know how these deals are constructed but there’s no doubt in my mind that the partner brand pays the credit card issuer or offers huge discounts to be the sponsored perk provider. Consider the Platinum Uber credits for example. With this benefit in place, Platinum cardholders undoubtedly tend to choose Uber over the competition in order to use the monthly Uber credit. I don’t know whether Uber pays the full cost of these credits to Amex or only a portion. Either way, for Uber, it was a bold marketing move worth paying for. For Amex, they got a new headline-grabbing perk (up to $200 per year!) for far less than $200 cost to them. And, for customers who frequently use Uber anyway, this perk practically amounts to $200 per year in real money rebates.
Customers lose when they over-value sponsored perks. These perks can lead to lock-in which may negatively affect their purchasing decisions. Consider, for example, the Amex Gold card’s dining credits. The Gold card offers up to $10 in statement credits monthly with participating dining partners: Boxed.com, Shake Shack, Seamless/Grubhub, Cheesecake Factory and Ruth’s Chris Steakhouse. If you’re a frequent Boxed.com customer, for example, you might think that the $10 per month benefit amounts to $120 extra per year in your pocket. In reality, though, you may then shop Boxed when other online sellers offer better prices. This kind of thing can quickly eat into the real value you get from this perk. Or, what about that Uber credit with the Amex Platinum card? Would you choose Uber even when Lyft is cheaper? If so, again, the real value gained is less than face value.
Chase makes the sponsored perk trend official
Beginning January 12th, Chase is increasing the Sapphire Reserve annual fee from $450 to $550. To soften the blow, they’ve added sponsored perks from Lyft and DoorDash. For 2020 and 2021 (that’s as far out as they’ve committed so far) cardholders will get a DoorDash DashPass subscription and $60 per year in DoorDash credits. Plus, cardholders get a one-year Lyft Pink subscription and will earn 10X on Lyft rides.
By blindly following Amex’s lead, Chase has made the sponsored perk trend official. They increased the annual fee while adding perks that cost them very little (if anything). I’m sure that Lyft and Doordash are thrilled at the idea of having all Sapphire Reserve cardholders turning to them first for rideshares and food deliveries.
For cardholders, the change is a mixed bag. I’m sure there are cardholders that will get more than $100 per year value in the combined benefits. My guess, though, is that most will get less than $100 per year value and so the increased annual fee will be a net loss. Worse, many cardholders will likely choose Lyft and DoorDash even when they are not the best options. When other options are significantly cheaper, it’s at least theoretically possible to estimate the cost in doing this. Much harder to quantify is the inconvenience cost. For example, you may have to wait longer for Lyft than for competitor rides. Or, you may choose to order from your second choice restaurant when DoorDash doesn’t support your favorite.
Get used to it and make good decisions
Love it or hate it, I believe that sponsored perks are here to stay. As consumers, we need to be practical about the true value of these perks. Rather than convince yourself that you’ll easily get maximum value from a perk, I suggest asking yourself how much you’d be willing to pay to subscribe to that perk if that was an option. For example, let’s say you ride Uber enough to easily make use of the full $200 per year in Uber credits from your Platinum card. That’s great, but I suggest that thinking of it as a $200 per year rebate is overgenerous to Amex. Instead, imagine if Uber offered to sell you an annual subscription to this perk. What would you pay each year in order to get $200 in Uber credits dolled out in $15 monthly chunks and $35 in December? Keep in mind that the credits disappear if they’re not used. It would be ridiculous to pay $200 for this subscription, right? Personally, I ride Uber often enough that I’d probably be willing to pay $100 per year for this subscription. I figure that it’s worth $100 and and the inconvenience of lock-in for the chance of getting back $200. So, when I look at the Platinum card’s annual fee, I figure that the Uber perk is worth $100. In that light, Amex’s move to increase the Platinum card’s annual fee from $450 to $550 with the added Uber credit was, for me, a wash.
How about Chase’s latest changes? The nice thing about the $60 per year DoorDash credit is that it’s not doled out monthly. You get the credit all at once. As a result, I think it will be very easy for most of us to take full advantage of that credit. One or two orders should easily use up the full $60. I’d be willing to pay $50 for the combination of $60 credit and free delivery (which you get from the included DashPass subscription). The Lyft benefits are harder for me to estimate value. Earning 10X rewards is great. Also, discounts given by the Lyft Pink subscription would be great. And I’d be really psyched about Lift Pink for the free scooter and bike rides if I lived in a city where Lyft offered these things. But I don’t. And, for now at least, I still have an Amex Platinum card which encourages me to use Uber (or Uber Eats). So, I personally wouldn’t pay much for the Lyft benefits if they were available as a combined subscription. My guess is that I’d be willing to fork over $25 per year, at most. Keep in mind, though, that if your circumstances are different, it can be far more valuable to you. For me, the Sapphire Reserve changes are a small net loss. I’ll be charged $100 per year more for the annual fee, but I’m only willing to pay $75 for the combined DoorDash and Lyft benefits. That means that I now see the Sapphire Reserve changes as costing me $25 per year. That’s not a huge loss by any means, but it’s important to know when deciding which cards to keep and cancel.