Chase And Amazon May Break Up, Whither Your 5% Rebate Card?

American Express issues a small business card with Amazon, and Synchrony Financial issues the Amazon store card. Both issuers are bidding on the Amazon consumer co-brand business according to Bloomberg.

Amazon.com Inc. is fielding bids to replace JPMorgan Chase & Co. as the issuer on its popular co-brand credit card, according to people familiar with the matter.

…JPMorgan is willing to part with the Amazon portfolio, according to some of the people familiar with the matter.

Chase certainly has the financial resources to retain the business if they want it, but according to reports “JPMorgan could fetch a 15% premium on the portfolio, which contains more than $15 billion in loans.”

Given’s Chase’s aggressiveness in acquiring new cardmembers and stretching for growth, it surprises me to read that they’re considering shedding a huge portfolio said the generate over $50 billion a year in consumer charges (making it perhaps half the size of the United card business) and after a nearly 20-year relationship.

The problem of course is that consumers take the Amazon card and then use it for Amazon spend and not for all of their spend. That makes it an expensive value proposition, because regardless of how the cost is split between the card issuer and merchant Amazon charges with the cards are a loss leader. The bet is that 5% can be paid out on a low enough portion of total spend that it’s a worthwhile investment to attract the revolve that consumers do on these cards.

I’d be surprised if Synchrony Financial had the wherewithal to pull off a marquis co-brand deal of this size. American Express might be willing to overpay for it, however.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I’m in that boat. I’ve had this card for years and use it exclusively at Amazon and Whole Foods.

  2. Guilty. I have had the card as a side-effect of my Amazon Prime membership and had never even considered using it for anything other than Amazon and Whole Foods.

  3. So, first they have Amazon card with 3% cashback on Amazon and 2% on restaurants, gas stations, drugstores and office supply, and 1% anywhere else – which I used everywhere listed above and without annual fee.
    Then they converted it to Prime card with 5% on Amazon and Whole Foods making it effectively annual fee card – well, why would I choose it over CSP/CSR for restaurant spend now? – while at the same time disincentivized its use anywhere else by introducing Freedom Unlimited with 1.5% real money cashback (not Amazon points) and recently 3% at drugstores.
    And now they’re wondering why people do not use Amazon card anywhere but at Amazon? Why indeed? geniuses.

  4. Sounds like both Amazon and Chase are doing a lot of leaks to gain leverage in the negotiations. It’s an important brand for a credit card issuer to have so I’m sure it’ll fetch a premium no matter who gets it.

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