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Chase adds mortgage rewards (JPM)

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Chase is offering cardholders of its premium Sapphire line 100,000 points, valued at approximately $2,000, if they open a mortgage with the bank, reports Market Watch.

This is the latest strike in an ongoing rewards battle between American Express and Chase — a battle that rose to its peak last year — to offer the most attractive rewards to lure in new credit card customers.

As 2016 drew to a close, American Express and Chase both offered up to 100,000 points as incentives to pick up their ultra-premium cards. Both have since walked back the rewards somewhat. While Chase and American Express remain the leaders with headline-grabbing perks, spending industry-wide by issuers on rewards is high, having risen to $22.6 billion in 2016, up from $10.4 billion in 2010.

Now Chase is using rewards to make existing clients profitable and loyal. Unlike previous large point payouts aimed to grow new cardholders, Chase’s mortgage points offer has current customers in its crosshairs. Chase’s rewards frenzy has hit huge numbers of new customers — some estimate 90,000 signed up for Sapphire Reserve from September and November 2016 — but now the challenge is keeping those customers around. After all, nothing is stopping the customers from abandoning the cards after they cash in on their sign-up bonuses. By luring millennials or other homebuyers to open up a mortgage, the bank aims to increase the stickiness of its rewards-driven customer base. Should Chase’s efforts prove successful, it could be the start of a trend to attach rewards to other profitable bank products, such as auto loans, at Chase and other issuers.

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Credit card rewards have become so popular in the US that issuers capture headlines just by launching a new rewards card. And with consumers now caring more about the type of rewards being offered than any other card feature, competition to offer the most lucrative and attractive rewards has intensified dramatically.

For consumers, the emphasis card issuers place on these cards has resulted in rewards becoming much more worthwhile and widespread, ranging from big sign-on bonuses to free travel. And with offers continuing to get better, consumers will continue seeking out the best rewards cards.

The value added from these cards is undeniable for issuers — in addition to increasing adoption of credit card products, the opportunity to earn rewards encourages cardholders to spend more money. This not only helps to drive up revenue, but also provides issuers an opportunity to mitigate any losses they may be feeling from the Durbin Amendment, which reduced how much fees issuers could charge on debt card transactions starting in 2011.

But it’s also important to note that offering such high-valued rewards comes at a price — Chase’s Sapphire Reserve card ended up reducing the bank’s profits by $200 million to $300 million in Q4 2016, according to Bloomberg. And as costs continue to rise, issuers will have to adjust to this new landscape by leveraging technology and partnerships to keep consumers engaged without sacrificing profits.

Ayoub Aouad, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed credit card rewards explainer that walks through the new credit card rewards landscape, which now includes rising consumer demand for rewards, increased opportunity for issuers to drive up usage of their credit card products, and increasing costs. After discussing the evolution that has led to this current landscape, the report analyzes how issuers will have to adjust in order to continue reaping the benefits of offering rewards without sacrificing significant profits.

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To get your copy of this invaluable guide, choose one of these options:

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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the payments ecosystem.

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