They offer you 100,000 points. Do you jump?
Shortly before Thanksgiving, Nathan Lundquist, a 22-year-old senior at Auburn University, was sitting in the Delta Air Lines lounge in the Atlanta airport, pondering his next credit card.
In blogs and online forums in which “churners” obsess over credit-card reward programs, he’d heard that once in a blue moon, American Express offers a 100,000-point sign-up bonus, more than twice the usual incentive, for its premium Platinum card. If he could hunt down the offer, it would be his ninth card, part of a collection carefully chosen over the previous 14 months to get the best travel perks and other rewards with the least financial sacrifice.[…]To attract the most profitable customers, banks are competing to offer the most irresistible perks, especially through premium cards such as the AmEx Platinum, Citibank’s Prestige card, and the new Chase Sapphire Reserve card, which created a frenzy online when it launched in August. […]Credit-card reward programs can look like ridiculously generous giveaways. But banks have sophisticated ways of ensuring that the programs ultimately make a profit.
“They’re no dummies,” Edward Niestat, managing director at consulting firm Novantas, said of the analysts who design reward programs. Banks boost profitability by making sure they’re signing up the right customers, people who tend to spend enough, borrow enough, or pay enough in fees to more than justify any perks they collect.
“The better you are at targeting,” Niestat said, “the more you can afford to pay them” in rewards.
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