Chase Limits New Sapphire Card Signups

One year after launching the incredibly popular Sapphire Reserve card, Chase has placed new restrictions on eligibility for new Sapphire Credit Card products (Sapphire Reserve, Sapphire Preferred, and Sapphire). If you currently have any one of those 3 cards OR if you’ve received a signup bonus from ANY of those cards in the last 24 months, you will not be approved for a new Sapphire product.

Here’s the language directly from chase.com:

This product is available to you if you do not have any Sapphire card and have not received a new cardmember bonus for any Sapphire card in the past 24 months. If you are an existing Sapphire customer and would like this product, please call the number on the back of your card to see if you are eligible for a product change. You will not receive the new cardmember bonus if you change products.

Given its timing, this new restriction is clearly an attempt by Chase to retain its trove of Sapphire Reserve customers that signed up for the card last year. All those initial signups–and there were many–will soon be seeing the next $450 annual fee post to their accounts. Chase needs to keep these customers in order for the card to be profitable. “You expense the acquisition costs over 12 months. The benefit comes over seven years,” J.P. Morgan Chairman and Chief Executive James Dimon said on a conference call last month.

With all those Sapphire Reserve annual fees coming due soon, Chase in all likelihood feared massive card cancellations and downgrades, with customers flocking to Sapphire Preferred for its rich signup bonus and waived annual fee for the first year. In my mind, this is a reasonable fear. I even wrote about how to time your Sapphire Reserve downgrade to eke out the best value.

The new signup restriction means that EVERYONE who has or has had a Sapphire Reserve card and received the signup bonus cannot be approved for the Sapphire Preferred for at least another year. You will be able to downgrade your Reserve to the Preferred, but by going this route, you won’t get the Preferred’s signup bonus nor will the first year be free.

My Take

This move makes sense for Chase and it should retain many Sapphire Reserve customers, which is clearly the goal here. A recent article stated that “Some at J.P. Morgan are raising concerns that Sapphire Reserve won’t make money for the bank, due in part to high demand and the card’s generous rewards. Meanwhile, the lender is pushing for about $200 million in fresh cost cuts in the unit that oversees the card.”

I would much rather see Chase use creative methods like this to keep customers, rather than reduce existing card benefits in order to cut costs. Time will tell if there are workarounds to this new approval rule, similar to the ones that circumvent Chase’s 5/24 rule.