Customers pile in, analysts fret as U.S. banks offer rich card awards

Mon Oct 17, 2016 12:12pm EDT
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By David Henry

NEW YORK (Reuters) - Morrie Low, a 27-year-old Seattle cocktail server, has found an unlikely new source of pleasure: credit card companies.

After working off card balances he built up during college, Low started collecting new cards in May specifically to reap the increasingly lucrative travel awards banks are offering to encourage spending on their cards.

In August, Low snagged a new Sapphire Reserve card, from JPMorgan Chase & Co, which has become a magnet for millennials willing to pay the $450 annual fee for a sign-up bonus worth as much as $1,500 in travel, plus $300 in annual spending credits and more freebies.

Now Low is planning a trip to Germany with his girlfriend on JPMorgan’s dime. "I have never been to Europe, so that is something pretty cool about this hobby," he said.

The Reserve card opens up a new front in the war among banks to build up their lucrative credit card businesses. While it may be fun for customers, investors and analysts worry that battle will eat away the fat profit margins that made the sector so attractive to banks in the first place.

"You have five or six big national players and they are going around killing one another," said Chris Kotowski, an analyst at Oppenheimer & Co.

METAL CARDS RUN OUT   Continued...

Credit cards of American Express are photographed in this illustration picture in this March 17, 2016, file photo. REUTERS/Kai Pfaffenbach/Illustration/Files