|by Jason Steele|
For years now, I have been telling everyone who would listen that perks are the future of credit cards. Sure miles and cash back are nice, but those rewards cost the bank money. The cost of cash is clear, but banks also spend billions buying miles from the airlines. Yes, they have been ramping up the sign up bonuses being offered this year, but there is only so high that they can go. Not only that, but for some reason, there are still tons of people who just don’t care much about points, miles, and even cash back. For these people one or two percent off this or that is not considered very significant. Obviously, I disagree, but the banks are aware of this behavior and are trying to offer other types of rewards in order to attract and retain customers.
How Airlines Do It
Airline cards used to be very boring. One mile per dollar spent, two miles for purchases at that airline, and not much more. If you want an example of such a featureless card, look at the basic Delta SkyMiles card, which is terrible. For a $55 annual fee, you get nothing but miles for your purchases. Other Delta cards like the Gold and Platinum SkyMiles cards grant their customers checked bag fee waivers and complimentary companion certificates. Even those perks weren’t keeping up with the pace of other cards such as United’s and Continental’s that were offering priority boarding.
Delta and Amex Step Up Their Game
Last week, Delta pretty much said to the rest of the airlines, “I’ll see your priority boarding and raise you an in-flight discount.” It turns our that the their top of the line Reserve card already featured priority boarding, but they added that feature to the Gold and Platinum cards. The lowly basic SkyMiles card and fee-free Options card still get nothing. They also added a 20% discount on in-flight purchases such as food, beverages, and in-flight entertainment like movies and video games. These new features are exactly what the banks and the airline love. It costs neither much actual money. Certainly priority boarding is a free perk, and I wouldn’t be surprised to learn that Delta will increase it’s revenue by offering highly marked up in-flight purchases at a more competitive price.
Of course, this is just another layer of priority boarding to deal with when you fly Delta. First you get families and special needs passengers, then SkyMiles Medallions, then anyone with a credit card before finally, they board the last few people who don’t qualify for any of the special pre-boarding classes. Another issue is that many of the prospective customers for the Gold and Platinum cards are already elite members in Delta’s program. For them, the priority boarding is pointless, just like the checked bag fee waivers are most of the time. (The bag fee waiver extends to eight others, but I am not sure if Medallion members normally receive that perk for their travel companions,)
The other way of looking at it is that bag fees are now just a tool to sell credit cards. I bet you didn’t see that coming when they imposed these fees a few years ago, ostensibly to recover the high cost of fuel. Yeah right. Whatever their original motivation, it is now clear that their goal is to lock in customers to their credit card, and presumably their loyalty, by lavishing perks on card holders and retracting previous benefits from everyone else.
The airlines are merely on the forefront of this evolving trend. It is not difficult to imaging other co-branded credit cards offering similar perks when using the services of the affiliate. I would love to see priority check out lanes at the supermarket, or early access to the latest gizmo at an electronics store. The credit card industry remains extremely competitive, and reward card issuers continue to upgrade the perks being offered to their customers.