New Rival for Sapphire Reserve, Platinum Rewards Cards

By AnnaMaria AndriotisFeaturesDow Jones Newswires

American Express Co.'s Platinum card is going to get even more competition.

U.S. Bancorp plans on May 1 to launch a premium card geared toward high spenders and millennials. This adds to the threats facing AmEx in a card category where it was until recently unrivaled.

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AmEx launched the Platinum card in 1984 and for decades remained the only large force in the premium rewards card market. That changed in 2013 when Citigroup Inc. launched its Prestige card; the pressure intensified last year after J.P. Morgan Chase & Co. launched its Sapphire Reserve card.

The hugely popular Sapphire Reserve offered a large sign-up bonus and a generous points system that in many ways trumped the Platinum card and has become a must-have with many millennials. AmEx has since upgraded its card benefits three times, though the company says the moves were in the works before the Sapphire Reserve launch.

Minneapolis-based U.S. Bancorp is less of a national threat to AmEx. But if "U.S. Bank is thinking about it, then PNC [Financial Services Group Inc.] is thinking about it, KeyBank is thinking about it, and it means the barrier to entry is low, anybody can roll out" one of these cards, said Vincent Caintic, managing director at investment banking firm Stephens Inc. who follows AmEx.

Called the Altitude Reserve Visa Infinite, U.S. Bancorp's card will offer three points per dollar spent on airfare, hotels and other travel categories and three points per dollar on any category when cardholders make the purchases with their mobile wallets. The card will cost $400 a year, which is lower than the $550 a year AmEx charges for the Platinum card or the $450 for a Sapphire Reserve card.

Like AmEx's card, the Altitude Reserve claims a host of benefits including access to celebrity chef tours, upgrades at high-end hotels, a concierge service for dinner, sports events and other reservations, as well as help with hotel and airfare bookings and free in-flight wi-fi. The card also offers points for spending with smartphone wallets, such as Apple Pay or Samsung Pay, which the bank is hoping will resonate with millennials.

AmEx already faces a number of challenges. It has been trying to recover from recent losses of large card partnerships and now finds itself on the defensive in a market it has long dominated. AmEx on Wednesday released first-quarter results that beat market estimates, though revenue net of interest expense was down 2% from a year prior, the fourth consecutive quarterly decline.

For AmEx, the fight over rewards cards comes as it has been trying to recover from recent losses of large card partnerships. And the card battles are personal with much of the competition coming from AmEx alums.

Gordon Smith, currently head of J.P. Morgan's consumer and community banking division, was with AmEx for more than 25 years until 2007. John Steward, U.S. Bank's president of retail payment solutions, who is spearheading the Altitude Reserve launch, spent 26 years at AmEx. Similarly, Citi's chief executive of cards, Jud Linville, was previously chief executive of consumer services at AmEx.

Rivals have piled into the premium-card market to boost purchase volume among creditworthy borrowers. Consumers who sign up for these cards tend to be affluent and pay their bills on time. For some issuers, the cards are an opportunity to grab new customers and sell them other services, whether it is a mortgage or wealth management, down the road.

U.S. Bank said its card is aimed at on-the-go professionals. To receive the card, consumers who aren't yet U.S. Bank customers will need to open an account, such as checking or savings, with the bank.

The Altitude Reserve will have the cheapest annual fee in this category, compared with Platinum, Prestige and Sapphire Reserve. Unlike AmEx's Platinum card, the Altitude Reserve, like the Sapphire Reserve, will allow cardholders to receive statement credits, which are dollar-for-dollar reimbursements, on a broad category of travel expenses, including airlines, hotels, taxis, car rentals and cruises.

The AmEx Platinum requires cardholders to choose an airline for a calendar year and then offers up to $200 in statement credits for incidental fees like checked bags and in-flight drinks. Altitude's annual statement credit is $325 and the Sapphire Reserve's is $300.

--Peter Rudegeair contributed to this article.

(END) Dow Jones Newswires

April 20, 2017 00:15 ET (04:15 GMT)