The Sapphire Reserve card is great for consumers – but not JPMorgan (JPM)

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August 1, 2017 3:56 PM

JPMorgan Chase is planning to cut about $200 million in costs related to the unit that manages its popular Sapphire Reserve card

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JPMorgan Chase is planning to cut about $200 million in costs related to the unit that manages its popular Sapphire Reserve card, according to the Wall Street Journal.

The bank already cut the rewards associated with the card in half back in January — initially, users who spent $4,000 in the first three months earned 100,000 rewards points toward travel, equivalent to roughly $1,500.

As a result of an overambitious original offering, Chase was able to spark adoption of its card, but it experienced significant losses nonetheless.

Chase's Sapphire Reserve card challenged the entire industry, as it quickly became one of the most sought-after card products.
Q3 2016
However, even with this success, Chase isn't expected to post a profit from the card for years.
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Cuts to rewards programs are likely to become even more prevalent as associated costs continue to skyrocket. In Q2 2017, American Express, which is often seen as a leader in the premium rewards market, saw spending on rewards reach its highest point since nine years ago. And this is part of a larger trend in the industry among the largest issuers — the six largest credit card issuers incurred an estimated $22.6 billion in credit card rewards expenses in 2016, more than double the costs seen in 2010, according to Instinet data cited by the Financial Times. These issuers will begin to walk back rewards offerings further and invest in technology, such as machine learning, to ensure cardholders don't game the system by failing to renew after reaping the initial benefits.

BI Intelligence, Business Insider's premium research service, has compiled a detailed credit card rewards explainer that:

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