- Travel perks continue to draw consumers to premium credit cards that charge an annual fee, even though cardholders weren't able to take advantage of those travel benefits as much during the COVID-19 pandemic, according to a Monday report from S&P Global Market Intelligence’s tech arm 451 Research. The firm polled about 1,700 people to assess their card preferences.
- Of the 302 U.S. respondents who told S&P they have at least one credit card with an annual fee, 52% named travel-related perks, such as access to airport lounges and elite-level membership in frequent travel programs, as the features of those cards they consider most valuable. About 39% cited travel protections like trip insurance, car rental collision coverage and/or roadside assistance as the most important features.
- However, "there may be an upward bound to consumers’ willingness to pay more" for premium cards, the report said. About 70% of those cardholders polled said an increase in the annual fee would be the most likely action to cause them to reconsider having the card.
With the pandemic’s suppression of travel, it’s notable that travel perks remain highly attractive to premium cardholders, the S&P report said. The firm surveyed a targeted group of business and technology professionals.
"Travel is really a huge driver of why people hold these cards and the benefits they gain from them," Tim Zawacki, principal research analyst with S&P Global Market Intelligence, said in an interview.
Reflecting the pent-up demand for travel, more than 70% of travelers plan to spend more money on domestic travel this year than they have in the previous year, and 64% said the same for international travel, according to an American Express survey released April 8 that polled 2,000 Americans and 1,000 residents of Japan, Australia, Mexico, India, the U.K. and Canada.
Chase’s Sapphire Reserve card, Capital One’s Venture X card, and the American Express Platinum card are among those premium cards that include annual travel credits, access to airport lounges and dining perks, per the S&P report.
When cardholders weren’t able to make use of those travel perks amid COVID-19 lockdowns, card issuers introduced other features to ensure the premium cards’ value propositions remained attractive. Amex, for example, added digital entertainment services, per the report.
The combination of those travel perks and lifestyle benefits has now enabled issuers "to push through increases in the annual fees associated with certain top-tier products," the report said. Amex increased its Platinum card fee from $550 to $695 in 2021. Chase also upped the Sapphire Reserve card fee from $450 to $550 in recent months.
In the future, card issuers could find it challenging to navigate cardholder expectations and keep those customers. Along with a limited willingness on the part of cardholders to pay higher annual fees, about 63% of premium cardholders said a reduction in benefits would lead them to reconsider holding the card.
After travel-related perks and enhanced travel protection, credits toward subscriptions, airline fees and other items came in third among benefits favored, at 27%. Annual airline companion passes came in fourth, at about 25%, and high or no preset spending limit came in fifth, at 21%.
Perhaps not surprisingly, the survey underscored premium cards’ popularity among those at higher income levels. Of 686 respondents across income levels, about 52% of those polled don’t have a credit card that charges an annual fee. But among the 291 respondents making more than $125,000 per year, about a third (32%) have one card that comes with an annual fee, and another third (31%) have two or more such cards.
Of those polled who currently have one or more credit cards, about 26% named Chase as the card they use most often to make purchases. About 16% said Citi; 10%, American Express; 10%, Bank of America; and 8%, Discover.
Cashback rewards on all purchases is the feature most important to about 60% of those S&P polled, closely followed by no annual fee (58%). Citi recently said more than 60% of its credit card customers prefer cashback as their reward choice, the S&P report said.
More than half of those who don’t have premium cards cited satisfaction with their no-fee credit cards, and 36% said the benefits of those premium cards aren’t worth the fees.