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American consumers are tapped out. From fast food to designer handbags, inflation-weary shoppers are balking at paying more. Companies therefore struggle to raise prices without losing customers. But one industry has escaped this penny-pinching: premium credit cards.
At a time when companies are touting price cuts, two of the country’s top credit card issuers are doing the opposite. JPMorgan this month raised the annual fee on its luxury card — the Chase Sapphire Reserve — to $795. That is a 45 per cent rise, making it one of the most expensive cards on the market. American Express is widely expected to raise the $695 annual fee for its Platinum premium card when it unveils new attendant perks and benefits in the autumn.
It takes nerves to charge more when trade and the global economy are under pressure. But such is the new economic reality in the US. As a growing number of Americans struggle, the finances of the country’s wealthiest have never been better. The top 20 per cent of income earners now account for roughly 40 per cent of total consumer spending, according to Moody’s Ratings.
Status is definitely part of the posh-plastic phenomenon. As well as the cachet of brandishing a card branded for the elite, users are promised beefier rewards at airlines and hotels, access to high-end airport lounges, hard to get restaurant reservations and live event tickets.
For Amex, a focus on affluent consumers and business travellers has paid off handsomely. Revenue and earnings are up by a fifth and a third over the past two years. The 30-day-plus delinquency rate for card member loans and receivables stood at 1.3 per cent during the first quarter, when the less-upmarket Synchrony’s delinquency rate was three times as large.
As a result, Amex’s return on average common equity — at 35 per cent — is far above those commonly seen in the banking sector. The stock has more than tripled in value over the past five years. This compares with the KBW Bank index’s 89 per cent gain.
Other banks aren’t oblivious to this trend. Aside from JPMorgan, whose consumer business also boasts more than 30 per cent returns on equity, Capital One is nipping at Amex’s heels with its own premium travel card offering called Venture X. Robinhood last year launched its own Gold Card. Defending one’s turf isn’t cheap: Amex’s expenses rose faster than its revenue in the first quarter of 2025; the cost of rewards grew twice as quickly.
There’s a secret hidden in all of this. One reason credit cards are lucrative is that customers can’t easily value what they’re getting. It can be hard to keep track of all the rewards on offer and many people often end up not redeeming all of them. Last year, US regulators seemed concerned about this corner of the market; now, less so. Pushing plastic to the privileged should therefore remain a profitable trade.
pan.yuk@ft.com
