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Earlier in the month I wrote that Chase is expected to introduce ‘Sapphire Banking’ on August 27. Chase is now confirming the project.
After they introduced their Sapphire Reserve Card they immediately took a $200 – $300 million hit to their bottom line. They took another $330 million charge in the just-completed second quarter for rewards expense.
Chase has revealed a lot of data around its new cardmembers and they’re affluent, good credit score, high income customers.
The thing is that Chase is spending so much on rewards that they’re likely giving back all the revenue from merchant swipe fees to the customer or servicing customers. Traditionally the only way to make money then would be on the revolve (finance charges from customers not paying their balances) but they’re acquiring customers least likely to do that.
The strategy then for making money on affluent customers moves to cross-selling, which is why they’ve offered points bonuses for new mortgages.
Now they’re moving to the next stage, taking the Sapphire branding and putting it onto a perk-rich checking account designed for new affluent customers who do not yet meet the target for Chase Private Client banking.
Copyright: jetcityimage / 123RF Stock Photo
Expect the new Chase Sapphire Banking is targeted at customers with between $100,000 and $250,000 in balances at the bank, and a $25 monthly fee applies for customers who don’t meet $75,000.
At this level you don’t pay fees for most things — checks, foreign transaction fees, out of network ATM withdrawals (and the other ATM’s fee gets reimbursed), wire transfers or stop payments.
The product should be more self-serve than Chase Private Client, with an emphasis on mobile. It may come with some discount investment trades, and may come with an initial bonus. They’d be silly not to offer something here, in the currency their customers already value. However we’ll have to wait closer to launch to learn more. Since fewer than half their Sapphire customers have a banking relationship with Chase at all, they see a real upside.
It’s not going to make sense to leave $75,000 or more sitting around in a low yielding account in order to get these benefits but it could make sense to consolidate investments in a Chase account in order to build this relationship. Chase isn’t going to make much money if all you do is move in mutual funds and don’t let them manage your investments.
Don’t sign up immediately once this launches. According to Doctor of Credit there will be no signup bonus when the product launches however a bonus will be added later this year. So it seems to make sense to wait.
At least for me it’s not worth it. More worthwhile is the occasional bonues they lob at other checking accounts, just scored $700 for maintaining $1500 balance for 6 months. After 7 I downgraded the account (the agent who helped me lost a prorated portion of his signup bonus if I cancelled 6 months or earlier) and kept the $700. They don’t happen all that often but they do happen, typically it’s $300 bonus for moving $25k into the account. So we’ll see what Sapphire banking does later this year.
I think Chase is a little late to the game since I’ve been heavily invested in Bank of America’s program which offers better perks. So I have little reason to switch to Chase.
I used to think Chase was really smart until they went after me for , I assume, MS in 2013. They started the closure by telling me to move a 60,000 checking account at 0 percent that had been open 25 years. Now they have let me have CSR, Hyatt , IHG and Ink, but won’t open a bank account . In applying for a new card I get the “previous unsatisfactory business relationship
letter.
As to this deal, I can get all the benefits from a local credit union, or a combination of Schwab banking and a high yield MMA. The Schwab debit card has worked in many countries where a Chase or Citi debit didn’t.
Chase ain’t all that bright.
Travelers and Citi learned cross -selling didn’t pan out as expected.
What works in banking is getting a customer to use bill pay. Once all the vendors are loaded , as long as your rate (cap one 360 for example ) is competitive , people are loathe to move. Cap one is .35 below the best rate offered but close enough to keep my bizness since 2004.