Millennials Are in Love With Prestige Credit Cards

Have you ever watched one of those YouTube videos where someone ‘unboxes’ a cool new phone or designer purse and talks excitedly about it attributes? These types of videos are generally reserved for new iPhones and Michael Kors purses, but there's recently been a wave of similar unboxing videos focusing on credit cards.


Prestige credit cards are becoming a status symbol for millennials – a demographic that hasn't been known to enthusiastically embrace credit cards in the past. In fact, a 2014 study by Bankrate found that 63 percent of millennials aged 18-29 didn't even own a credit card. While the number of young people getting these prestige cards is unlikely to greatly change that percentage, it does represent an interesting new trend. 


So, what is getting these millennials excited about credit? Well, the one card that is receiving the most attention is the Chase Sapphire Reserve credit card. If you watch one of the unboxing videos, you’ll see that it actually comes in a fancy looking blue box and is made out of metal instead of plastic.


According to an article by Bloomberg, the bank itself was surprised by the high levels of demand for the card. They accidentally published an application link before the launch and were flooded with applications. Once they did launch, they issued so many cards that they went through their stock of metal cards that was supposed to last 10-12 months in just three weeks. The company had to send temporary plastic cards to many angry customers.


The excitement around the card’s launch was stoked by credit card blogs, which hyped the card for months ahead of its release. These blogs review credit cards and compare their rewards, often encouraging something called travel hacking – using credit cards in order to get the most rewards points in order to go on vacations paid mostly by credit card rewards. Unsurprisingly, the Chase card is such a hit because of its amazing travel rewards.


While the Chase card has lots of perks, for millennials, the appeal is simple - the sign-up bonus is enormous. In recent years, a number of popular credit cards have started competing on sign-up bonus promotions. The Chase card offers 100,000 travel points as a bonus which is a benefit that is worth up to $1,500. This benefit is likely so attractive to millennials because they love to travel since their generation tends to focus on experiences rather than things.  


If the card sounds too good to be true to you, it’s because you haven’t heard about its other attributes. To get the sign-up bonus, you have to spend $4,000 in three months. That’s a lot for most millennials to charge to their cards in such a short period and that means that many millennials will likely miss out on the bonus offer since they can’t spend that much.


In addition to the minimum spend to qualify for the bonus, you also have to pay the astronomical annual fee – $450 per year. That's a significant amount of money and not something that you would expect a budget conscious millennial to be willing to pay. 


But other than the sign-up bonus, the card has other attractive perks such as offering 3 times the points on travel, providing access to VIP airport lounges around the world, and offering a concierge to help you book travel and dinner reservations.


Chase isn’t the first company to offer a prestige credit card with big rewards and an equally big annual fee. The American Express Platinum card and the Citi Prestige card are similar. They also both charge large annual fees with Citi charging $450 and AmEx charging $450 and they also have great benefits. For example, the AmEx card offers airport lounge access, gold status at Starwood and Hilton hotels, and $200 annually for non-ticket airline purchases such as baggage fees. The Citi Prestige card, meanwhile, might be even more attractive with an annual $250 for any type of airline purchase and a fourth night free on paid hotel stays.


According to a recent article in the New York Times, the demand for premium cards is increasing. Citi Prestige increased their cardholders sixfold in just the last 18 months. Similarly, American Express claims that their Platinum membership is growing.


While millennials seem to love cards like Chase’s Sapphire Reserve, it will be interesting to see if they’ll remain loyal to the card after they’ve spent the sign-up bonus and they’re approaching the next big annual fee payment. It will likely depend on how much they travel and how much value they can get out of the everyday rewards. Many cardholders now churn cards, taking advantage of sign-up bonuses and then cancelling the cards and moving on to the next big bonus offer.


In a few months, we might be seeing unboxing videos for the next trendy prestige card popping up on Youtube.


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