{ "media_type": "text", "post_content": "How does chase make any money on the Chase Sapphire Reserve?", "post_id": "5babea1f74baf60012aa4f89", "reply_count": 12, "vote_count": 5, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

How does chase make any money on the Chase Sapphire Reserve?

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Well, 17.74% to 24.74% APR on balances and 26.74% on cash advances - that’s how.

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The way I see it, for almost every dollar I spend on the card (since I spend almost all my money on food/travel/Uber etc.), I’m getting 4.5% back in travel rewards and they only make 2-3% in fees depending on the merchant. I get that others have different spending patterns and there are other revenue streams (e.g., interest, annual fees) but it seems like there must be a huge chunk of cardholders like me out there that are costing them hundreds or thousands of dollars per year in losses. Anyone with insight into the industry or unit economics care to explain?

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High swipe fees charged to merchants (1.7-2.1% plus a base transaction fee) which is currently the subject of multiple lawsuits probably heading to the supreme court Interest charges and fees for those who get the card but can't afford it (you'd be surprised how many ppl are pretentious like that or lack basic financial knowledge) Low rewards/benefits utilization (1 cent per point or less for gift cards/cash redemptions, already have Global Entry, etc.) from those who don't know/care about maximizing rewards Low rewards earn rate from those who don't actually travel or eat out that much but still think the card is profitable for them! Last and obviously, theyre working on increasing cross selling chase products to Reserve holders

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OP, I think you already identified how: the vast majority of people have drastically different spending habits than most people on this app. Chase can afford to lose money on a small minority of people if they're making money on the rest

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2.1% interchange fee on transactions. The premium cards have a MUCH higher card fee for merchants than the run of the mill cards. Expect merchants to try to block people using those cards.

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https://www.wsj.com/articles/shoppers-love-rewards-credit-cards-retailers-hate-them-1537867801?emailToken=dc6c434c232cf0e46f8eeba98279580eR8pV5r/hvxnSsmqd6zabVqkBKJKsKdr0me8vBiNP6H2/VYKCliEOjHlvXbxN7Fc2ayYF5XjgfbrLlvYZgIedbfnYoo9qq6EPnsEWFrKYachirTEV/8YJSG5Z8bhyVRe2&reflink=article_copyURL_share

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What makes you think they make money on it?

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There’s also the psychological aspect that most people most of the time will spend more total dollars using plastic than they would spending straight cash. So CCs incentivize spending more by removing some of the immediate pain of the transaction, and by providing rewards. “I’m not sure I want to spend on this widget, but I’ll go ahead and do it for the points/rewards/etc"

Interest

They are certainly dependent on people to revolve to make this card profitable, but even then it’s not clear to me that they can ever make money on this without making very favorable assumptions about loyalty and defaults

There was a good WSJ article from about a year ago. If I remember correctly, I believe JPM lost around 200-300 million after just the first year. It was positioned to bring in young rewards CC crazed millennials to their more traditional investment products (which I’m assuming have huge expense ratios).

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