The coronavirus pandemic and the economic recession that followed has hit the travel and financial industries hard. And that shows in the world of travel rewards credit cards.
Many of the best and most well-known travel credit cards on the market have big annual fees that are worth their weight in gold in normal times. But these aren’t normal times. With travel on pause, big annual fees have been harder to justify. Consumers are facing tough decisions about opening new cards or renewing what’s already in their wallets.
The banks know this. That’s why they’ve started mixing things up, offering a number of new, non-travel benefits to their top travel cards. But just how long will these new perks last? And is it possible they’ll stick around for good?
How Travel Cards Have Evolved During Coronavirus
Capital One struck first by announcing that Capital One Venture Miles can now be redeemed for both dining purchases and streaming services through June 30. Just recently, they extended this date out to Sept. 30.
In early May, American Express rolled out monthly credits for streaming services like Netflix and Disney +, and cell phone services like Verizon and AT&T to their top tier Platinum Card from American Express and the American Express Green Card through the end of 2020. Just charge those services to your card and the credits will kick in automatically.
That same day, Chase added a category multiplier to almost all of their travel rewards credit cards – making it possible to earn 5x or 3x points per dollar spent at grocery stores on the Chase Sapphire Reserve and Chase Sapphire Preferred Card, respectively, through the end of June.
And just a few weeks ago, Chase added a new way to use Ultimate Rewards points called the Pay Yourself Back feature. It allows you to use Ultimate Rewards points for purchases at grocery stores, home improvement stores, restaurants, and food delivery platforms like Uber Eats and DoorDash at a rate of 1.5 cents each (if you hold the Sapphire Reserve) or 1.25 cents (if you hold the Sapphire Preferred). This is the same value they have in the Chase Ultimate Rewards Travel Portal.
Even Citi and U.S. Bank have made news by announcing the travel credits that come on their top tier travel cards can now be used at restaurants. And on the Citi Prestige Card, you will now earn 5 ThankYou Points per $1 spent on all online purchases through August 31, 2020.
What do all of these changes have in common? They’re all new benefits on top travel rewards credit cards that have nothing to do with travel. It’s how the banks are hedging the current travel environment, trying to deter some of their most valuable cardholders from closing their accounts.
And while all of these new benefits have specific end dates, we question whether or not we really will see these benefits disappear.
The Case for Making These Benefits Permanent
Like many industries, the recovery for travel is going to be slow. Until people feel safe, the demand for air travel will be minimal. And exactly when that happens will be different for everyone.
So pulling these new benefits at the end of June, September or even the end of 2020 might be a poor decision. If travelers are not ready to travel by October, losing these benefits by September makes the decision to cancel a card easier.
Critically, some of these benefits aren’t costing the card issuers much to offer – if anything. Take, for example, the new ability to use Capital One Venture Miles for dining and streaming services and the new Pay Yourself Back feature from Chase. Since the points are redeemed at the same rate as they would on a travel purchase, it won’t cost Chase any more. So why get rid of it at all?
In the case of the streaming credits from Amex, it certainly does cost them some money. Yet Amex knows that not everyone will take advantage of these new benefits – making it easier to justify adding it permanently.
There are some signs banks are already weighing these decisions.
Doctor of Credit recently reported that the new Chase Pay Yourself back feature was on the table as a permanent benefit even before coronavirus hit. And while we may not see these specific categories being offered indefinitely, it is possible that they will rotate similar to how the Chase Freedom Card offers increased cash back bonus on different spending categories each quarter.
It’s another way to offer value when travel is off the table. And while we may not see the benefits in their current state stick around long term, I think it is very likely that new benefits added to many of these cards won’t be travel-focused.
It took a pandemic for banks to evaluate the benefits offering on some of their top tier travel cards. All of these top travel cards had few, if any, benefits that could be used outside of travel.
Travel might resume, but the uncertainty isn’t going anywhere anytime soon. Adding non-travel benefits to these cards as a permanent perk is a good hedge against future downturns. And they’re an easy way for banks to limit the loss of existing cardholders while perhaps attracting some new ones.