Next month Bank of America will introduce a credit card under its Premium Rewards scheme which will come with an annual fee of $95. The card will be cheaper than similar products issued by other financial institutions such as the Sapphire Reserve from JPMorgan Chase whose annual fee is $450 and Platinum Card from American Express and whose annual fee is $550.
For each dollar that cardholders spend on dining and travel, Bank of America will issue them with two points. The cardholders will also get 1.5 points for every dollar they spend on other items and services. There will be no limits for cardholders on the amount of points they can earn making the card similar to JPMorgan’s and Citigroup’s mass-market cards.
Cardholders with a balance of at the minimum of $20,000 in investment, savings or checking accounts will be able to earn more. For cardholders whose bank balance is at least $20,000 but under $50,000, they will get 2.5 points for every dollar they spend on dining and travel and 1.875 points on other items and services. Those whose bank balances are at least $50,000 but under $100,000 will get 3 points for every dollar they spend on dining and travel and 2.25 points on other items and services.
Cardholders with a balance of at the minimum $100,000 will be rewarded with 3.5 points for every dollar they spend on dining and travel and 2.6 points on any other purchase. Customers who sign for the Premium Rewards program and who spend approximately $3,000 will get 50,000 points as a sign-up bonus. Among premium cards this spending threshold is one of the lowest.
Risk of gamers
Concerns are rising in the card sector over the profitability of the premium cards. Earlier in the year JPMorgan Chase lowered the sign-up bonus offer of 100,000 points and is now on a cost-cutting effort at the unit responsible for the card. Of particular concern are the cardholders who are just out to game the system by signing up with the aim of getting the lucrative rewards but then quit after redeeming the rewards. To avoid running the risk of revenue projections falling short, a lot of card issuers need to keep cardholders on the program for a couple of years.
Bank of America’s Premium Rewards card is part of the Preferred Rewards program which was launched three years ago with the aim of offering discounts on loan interest rates and fees as well as high interest rates on deposits.