Amex’s preemptive retention credits mark a strategy shift. Will others compete?

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People often justify keeping an Amex card because “I save at least $XXX each year in Amex Offers”. Whenever I see Amex Offers used as a justification for paying the annual fee, I want to shout, “But you can get those Amex Offers with a fee-free card like the Amex Everyday or Blue Business Plus!”. It hasn’t made sense to me to justify one’s annual fee by the use of Amex Offers. Until now.

Amex shook things up yesterday with awesome new Amex Offers on nearly all of its co-branded cards, including dining credits, wireless credits, and spending bonuses. See the following posts:

The first catch is that you must have had your card open by January 1, 2021. In other words, they are incentivizing existing cardholders to keep these cards as opposed to using these offers to lure in new cardholders (whom Amex has presumably already wooed with an attractive welcome offer).

The more important catch is that those same offers are not available on Amex-branded (i.e. Membership Rewards-earning) cards. In this case, you have to have the co-branded card to have the offer. And in many cases the more expensive co-branded card you have, the better the offer.

This marks a significant departure from Amex’s long-time strategy, whereby they have more often released an offer across many/most cards and allowed customers to choose the card to which they would prefer to sync an offer. Sure, there are occasionally offers targeted to business cards or ones that are only found on some accounts, but until COVID credit card enhancements began last year, we hadn’t often seen offers that are broadly applicable (like spend $20 on dining anywhere and get $20 back) so narrowly targeted to a specific card.

What began with enhancements on the Platinum and Delta cards last year has now spread to include Marriott Bonvoy and Hilton Honors cards. I think this new method is really smart for Amex. I would personally much rather have seen an offer for $20 back on $20 at restaurants pop up on all of my cards so that I could choose to load it to the Gold card, which is where I typically prefer to put my restaurant spend. Instead, Amex is going to tie that benefit to having the Amex Aspire card open. That is a smart play to add value to that specific card and give cardholders a reason to keep it open even if they aren’t traveling right now.

In the case of that dining credit, it makes the Aspire card continue to be a highly compelling value. I have long argued that the Hilton Honors Aspire card is the most valuable Amex card on the market in an ongoing sense (it definitely doesn’t have the most valuable welcome bonus but arguably does have the best set of ongoing benefits). That is because the card includes the following significant annual perks (along with others that I value less):

  • $250 in airline incidental fee credits
  • $250 in Hilton resort credit
  • 1 free weekend night at any Hilton property
  • Hilton Diamond status (the main benefit over Gold is guaranteed lounge access)

I continue to be amazed that the card offers that much for $450. In a normal world, the free weekend night can be worth more than the annual fee on its own. Assuming you value the annual credits at even 50% of face value, the card is a big net win in my opinion.

Now add to all that the $20 monthly dining credit for 11 months and you’ve got another $220 back this year. That’s pretty ridiculous for anyone who spends at least $20 per month on dining. Obviously the dining credit alone doesn’t mitigate both the resort and airline credits if you feel like you are unable to use them, though we maintain a guide for what triggers Amex airline incidental fees and the Hilton resort credit can be useful even if you’re not staying at a resort in 2021. As I personally still value the resort and airline fee credits and I’m happy to put this year’s free weekend night with last year’s toward a stay sometime next year, I just couldn’t justify closing the Aspire this year. I’d have already felt good about keeping it, but at this point I just can’t see myself even seriously asking for a retention offer.

Add on top of the above the new Amex Offer for 10,000 bonus Hilton points with each $5K spend. Unbonused spend will  therefore earn 5x everywhere on the Aspire card assuming you do your spend in $5K increments. Given that our Reasonable Redemption Value for Hilton points is only 0.45c per point, that’s a return of about 2.25% in Hilton points. Hilton frequently sells their points for half a cent each, meaning that with a card like the Alliant Cashback Visa, which earns 2.5% back everywhere (albeit a dubious 2.5%), you could earn the equivalent of 5 Hilton points per dollar spent every day. Still, 2.25% back isn’t bad for anyone who doesn’t have one of a select few cards that earn a better return on unbonused spend. That assumes that you like and want Hilton points — but if you do, this is a nice bonus opportunity.

That all presents a good argument for keeping the Hilton Aspire card if you also value the other benefits, but let’s consider a card where the offer alone makes the card a simple keeper: the Marriott Bonvoy Business card popped up with an offer for $15 back each month on wireless services. For those who can make use of the credit, that’s $165 in credits on a card that costs $125 per year and comes with a free annual night. That’s a trade I’ll take all day long. I should note that some folks won’t find this credit useful because they would need to forgo auto-pay discounts when using a credit card to pay their bills, but if you can use the credit without sacrificing any discounts, this is a great deal. And yet again, as with the Hilton Aspire card above, I just can’t even pretend to make the argument as to why I would consider canceling this card in 2021. As a T-Mobile customer, I can easily pay $15 toward my bill without losing my auto-pay discount, so this offer is an easy $40 win plus a free night certificate. You win, Amex. And so do I.

The bonus point spending offer for Marriott feels less compelling. We talked about this on a previous Frequent Miler on the Air because Amex offered similar spending bonuses on Marriott cards last year. The issue on these spending offers (which also applies to the Hilton offer above!) is two-fold:

  1. You have to thread the needle to get optimal return. Any extra spend drops your return. Keeping track is a pain.
  2. Amex doesn’t care for certain types of purchases which might make it easier to track how much you’ve spent

The second bullet point is likely to ward off the manufactured spenders among us, and Amex is obviously fine with that. A bigger issue is where they draw the line. If Bob Jones starts using his Marriott Bonvoy Business card or Hilton Honors card everywhere to trigger the spending offer and as such he buys some gift cards for gifts along the way (for personal use / gifts or maybe to fund a college 529 plan), I would expect that to be acceptable use. Where is the line? Will Bob have any risk of inadvertently finding the line? It is annoying in my opinion.

Of course, at this time of year, tax payments come to mind as a potentially easy / good use of a spending bonus like this. One could pretty easily thread the needle and spend the perfect amount on taxes and effectively earning 3x Marriott points or 5x Hilton Honors points on tax payments. But for the average person, I’m not sure that a spending threshhold of $7500 at a time (on the Bonvoy Business card) will move the needle and get this card in their wallet. If you have an option like the Bank of America Premium Rewards card with Platinum Honors or you are working on meeting a new card welcome offer or other big spend bonus, it is hard to imagine the Marriott card being your best option here.

Still, Amex is making some move to make it rewarding to spend on the card on an ongoing basis. However, this is essentially what the Barclays Arrival Premier tried to do with its welcome bonus a few years ago and it was quickly and resoundingly panned across the blogosphere (except for one guy who was accused for being a shameless shill for finding the positives in it). I just don’t think it is going to resonate much better this time for Amex than it did for Barclays (though this ongoing spend offer is obviously different than trying to attract new customers with an ongoing spend bonus as Barclays attempted).

However, I do think that the monthly wireless and dining credits are very likely to resonate with customers in a way that (I bet Amex is hoping) will convince cardholders to keep their Amex cards open. That is perhaps the most interesting part of the strategy here in my opinion. While Amex had only been lukewarm on retention offers for years, particularly on the co-branded cards, things have seemingly swung in the complete opposite direction during the pandemic. Last year, we started hearing reports of great retention offers on cards that earn Membership Rewards points (upwards of 30K or 50K points with no spend required for some people on the Platinum card and 20K-30K with no spend on the Gold). Now Amex seems to be aggressively going after retention on the co-branded cards in a proactive way.

That is an interesting shift in strategy. In the past, most card issuers would hold off on offering retention credits and extra spending offers unless a cardholder expressed interest in canceling. Now, Amex seems to be offering these types of things up-front to show that these cards have fantastic value before cardholders get around to thinking about canceling them. And they aren’t alone — Barclays threw out some amazing spending offers late last year that resembled new card welcome offers and clearly were meant to proactively offer customers a reason to not only keep their cards but spend regularly on them. I find this type of behavior from credit card issuers to be an interesting strategy and one that excites me. While I didn’t necessarily mind getting on the phone or pulling up the chat tool to discuss my options when thinking about cancelling, I am happy to receive these proactive offers to enhance the value of holding a card — particularly one like the Aspire that I was already likely to keep.

Now that Amex has really unleashed that strategy in a more widespread way, will we see Chase or Citi respond? Citi has always been particularly generous with retention offers and Chase became unexpectedly generous in that regard last year, but I would love to see some competition to enhance cards with credits we can easily use. Hopefully this is the mark of good things to come.

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