J.P. Morgan Chase’s second quarter was profitable, but the company had to pay out more in credit card rewards to its customers than was projected. That’s because credit card users are getting smarter about racking up and using credit card rewards, CNBC reported.
While the bank had an $8.32 billion profit for the second quarter, consumers took $330 million out of the profits by redeeming points.
In an effort to land more cardholders, companies have been competing to offer the best rewards credit cards in recent years. J.P. Morgan’s effort to ramp up its customers came in the form of its Sapphire Reserve card. It offered a host of perks, such as a 100,000-point sign-up bonus and travel and dining triple rewards points.
J.P. Morgan’s chief financial officer, Marianne Lake, told CNBC that $330 million is a higher total for rewards than J.P. Morgan has had in recent years – and it’s something the company keeps an eye on.
“We do pretty regularly review our rewards liability in light of evolving consumer behavior,” Lake said, according to CNBC.
Are Consumers Getting Smarter?
If J.P. Morgan’s totals are any indication, consumers are no longer content to simply get the basics from their credit cards – they are getting smarter about maximizing the benefits from them.
In fact, it has almost become an art form for users. Some cardholders brag on online forums about how they maximize their rewards by using apps on devices and spreadsheets, according to CNBC.
The cardholders will look at which categories give them the most points. So if they have both a travel credit card and a cash-back credit card, they’ll use them in the appropriate categories while shopping so they can reap the most benefits.
How Consumers Can Make the Most of Their Rewards
Amid reports that up to half of travel reward cardholders don’t use their benefits, consumers may need a few tips about how to maximize their earnings.
The first rule about earning credit card rewards is that consumers shouldn’t carry a balance on their cards or the interest charges will effectively cancel out the benefits they receive.
The next best way to maximize benefits is knowing what the full benefits are to begin with. Among the least often used perks from travel cards are trip cancellation, airport lounge access, checking bags for free, and priority boarding.
Finally, cardholders should ensure any potential annual fees are low enough that they’ll still see an overall benefit from carrying that card.
Author: Shannon Serpette
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