Credit card customers at JPMorgan Chase appear to be cashing in on their loyalty rewards faster than expected.
The bank said Friday that it needed to set aside an additional $330 million from April through June because its customers have taken advantage of perks like cash-back on purchases and frequent-flyer miles. 
Having to set aside more than expected is not ideal for banks, but there is a silver lining: a rise in points redemption shows that customers are confident enough in the program to boost their spending and accrue loyalty points.
“This is a great example of how loyalty rewards can play two roles,” says Laura Siegfried, senior loyalty consultant at Kobie Marketing. “$330 million is a large number, but if the customers earning those rewards are spending sufficiently more money because of the reward benefits, it is a good investment, what we call ‘good liability.’ If rewards are truly driving incremental activity, it’s money well spent.”
As explained by Chase’s CFO, Marianne Lake, “This is maybe larger than we have seen over the course of the last several years. We do pretty regularly review our rewards liability in light of evolving consumer behavior.”
Credit-card issuers scrambling to sign coveted high-spending customers have sparked a rewards war in recent years. J.P. Morgan ratcheted up the competition in 2016 with its Sapphire Reserve card, which came with lavish perks, including a 100,000-point signing bonus and triple rewards for travel and dining.
An increase in cardmembers for the Chase Sapphire Reserve and Preferred cards have led to strong loan growth and record retention rates, so while the Sapphire Reserve initially had a big welcome bonus, users are holding onto the card and engaging with Chase in more ways, which is great news for Chase.
As Lake describes it, “Engaged customers bring us more spend, they bring us more of their share of wallet.”
This showed up in the bank’s latest results, as profits rose 18.3 percent and money set aside for potential credit losses actually declined from $286 million to $1.1 billion.
However, according to Greg McBride, chief financial analyst at, this recent $330 million charge may indicate that consumers are simply getting smarter with their use of rewards programs.
“There’s a subset of savvy credit-card users who are diligent about maximizing their usage to capture the biggest benefit they can,” McBride said.
These consumers, he stated, only use the cards in the spending categories that reward the most points. For instance, they use the Sapphire card to pay for dining and travel but switch to Chase’s
Freedom card to pay for things such as gas and groceries.
While profits for Chase seem to be steadily growing, only time will tell if this major rewards expense will have a positive or negative long-term effect on its business.

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