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Chase Sapphire, Chase Sapphire with Ultimate Rewards-a new credit card from Chase. Targeted At Households With Incomes Exceeding $120000:JPMorgan Chase & Co., the biggest U.S. credit card lender, is taking aim at the market for affluent card holders dominated by American Express Co.
Chase Sapphire, targeted at households with incomes exceeding $120,000, has no pre-set spending limit and holders earn a point for every dollar they spend. Chase is seeking customers beyond its 152 million cards issued in North America.
Our desire is to make sure we have exactly the right product in the hands of our customers, Gordon Smith, chief executive officer of the card division, said in an Aug. 17 interview. “If we cannibalize ourselves and move customers from one product to another, but we capture more of their business, then we’re absolutely fine with that.”
JPMorgan’s card operation lost $1.59 billion in the past three quarters as consumer spending fell 2 percent since its peak at the end of 2007, the deepest retrenchment since 1980. The division isn’t expected to earn a profit in 2009 or 2010.
The card unit is showing signs of recovery. The default rate in July fell for the second month in a row, to 7.92 percent from 8.04 percent in June, a signal the worst recession since the 1930s may be ending. Charge-offs usually track the U.S. unemployment rate, which fell last month to 9.4 percent, the first decline since the recession began in December 2007.
The card business is a mirror image of the economy and it’s been an extremely difficult time,” said Smith, who was president of AmEx’s global commercial card business before joining JPMorgan. “Cards are an important part of how we live our lives and I think we’ll see a strong future once we’re out of the difficult economy.
Visa, MasterCard
The Sapphire card will be available on the Visa Inc. and MasterCard Inc. networks, an advantage for JPMorgan because those cards are accepted in more places than American Express, Smith said. Visa was accepted at 8 million U.S. locations last year compared with 7.9 million for MasterCard and 4.6 million for American Express, according to the Nilson Report, an industry newsletter.
American Express CEO Kenneth Chenault told investors Aug. 5 his cardholders on average spend 3.5 times more than Visa cardholders and 4.5 times more than MasterCard users.
“Merchants are looking for customer spending and our cardmembers provide it,” Chenault said. “Despite all the claims by Visa and MasterCard about success in the affluent segment, where it really counts — in the results they haven’t moved the dial at all.”
Smith’s challenge will be convincing customers Sapphire’s rewards are a better fit, Bill Hardekopf, CEO of industry newsletter LowCards.com, said in an e-mail. Rewards should be evaluated based on an individual’s amount and type of spending, he said.