Last week, we saw the launch of two new IHG credit cards to replace the single IHG credit card that Chase has had for years. That launch also saw an announcement to most cardholders that the precious free anniversary night would only be available for booking until May 1 of this year before it would follow the rules of the new, more expensive IHG credit card. Note: cardholders who receive their anniversary night before May 1 will still be able to use those for any hotel.
An Important Lesson from the IHG Credit Card Devaluation
The IHG Credit Card Devaluation
In case you don’t have an IHG card currently or somehow missed it, what happened was that Chase and IHG took the incredibly popular IHG card with its $49 annual fee and free anniversary night at any IHG hotel and announced it would end (still available for now – apply and contact Chase after to be matched to the 80,000 point offer – they may not but worth a try). In its place, Chase released two new IHG cards, one with a $29 annual fee and one with a $89 annual fee. However, even the $89 annual fee card does not have a free night but only a free night for certain hotels up to 40,000 points (with a bunch of exclusions).
What Lesson Can We Learn from the IHG Credit Card Devaluation?
I honestly do not believe that most people were surprised that there was a IHG credit card devaluation. That card with a small $49 annual fee and free anniversary night at any IHG hotel (now costing up to 70,000 points per night) was overly ripe for a devaluation. Over the years that this card has been around, IHG has bumped up their top tier of hotels from 50,000 points per night to 70,000 points per night. Yet, the card’s annual fee and virtually unlimited hotels for the use of that free night stayed the same.
The problem was that many people used the IHG credit card as a “sock drawer” card – they got it, met the initial minimum spending for the bonus and then stuck it in their drawer. They would keep it and pay the annual fee just to get that valuable free night.
Chase Likely Lost Money From Many Customers
There was no way that IHG and Chase were going to let people keep redeeming that anniversary night at hotels that cost between $200 – $500 per night while only paying $49 for that privilege. Chase was making nothing on the customer that didn’t use that card. The customers that put actual charges on the card did help Chase to reap something from the card. But, most customers did not use that card for spending as it did not really have anything in the spending areas that other cards could provide in bonuses either.
[Edit] A Lesson for Chase and IHG
We can see from other issuers of hotel cards that the free night becomes worth it to the issuer if they require around $10,000 in spending per year. If Chase and IHG had done that instead of wiping out the total free night altogether, there would have been less blowback from users. They missed an opportunity with the new cards by not offering something like this
I think we can see from the amounts that other cards require for that “anniversary bonus” that there is an amount of spending at which the free night is worth it to the issuer. If only they had done it – and maybe they will at some point.
A Lesson for Us: Put Some Spending on “Sock Drawer” Cards That Are Too Good to Be Lasting!
However, sometimes that doesn’t matter! There are not that many cards left with benefits that overwhelm the annual fee of the card. If you happen to have one of those cards, you should definitely pull it out of the drawer every so often and put some spending on the card. Maybe, this will help the card issuer to see that they can get money from the customer without having to tear up the card’s great bonus.
At the end of the day, I think most IHG card customers would have been happy to pay $89 and still get that free night. Instead, that free night at any IHG card is gone and is now limited to lower category properties. That was a double blow. But, it does remind us that the banks are in this business to make money, not to give their customers free travel.
Takeaway
So, make sure you spread some of that spending around so that the banks can make at least a little something off of the processing fees. Better to do this with a sock drawer card than to face another devaluation like this.
Should the customers be disappointed? Yes! But, should the customers who were useless to the issuer be upset? No! Hopefully this lesson will help us all to remember that when a card and its benefits are too good to be true, we should throw some spending on it to hopefully prolong the devaluation that will inevitably come.
(just to be clear, I DO NOT support a devaluation like this but also cannot stand people complaining about something that they knew full well was a steal for a long time!)
I have to disagree here. People arbitrarily spending ‘some’ money on a card with a horrible earn ratio wouldn’t save the card. Even then, how much should a person waste on this card when each $ spent personal costs in real dollars in the form of lost rewards on another card?
The issue here is Chase and IHG, who still hasn’t learned their lesson with the new card. If you can’t get a good yield on spend for *anything* besides IHG spending, even while your own cards like CSR provide great value to use, people won’t put spend on that card.
They need to adjust card earning rates if they want it to be a ‘wallet card’.
I agree completely on the earning rates on the old card and the new cards. The banks are in a position (for now) where they do not feel they need to entice customers to spend on the cards, even for certain categories – on a co-branded card, that is.
My point goes more to people complaining about what everyone knows was the best hotel card perk out there being devalued – while many people were barely doing any spending on the card at all and basically just paying $49 for that free night. That is completely unsustainable, especially if the masses were keeping it in drawers. I think it does need to go both ways – Chase/IHG could reward their customers (like Hyatt does) with various bonuses and offers for the card and customers could use the card more.
@ Dave makes a good point. The point with the IHG card is it has great benefits but crappy earnings. In fact, with the new “replacement” cards they made earnings more lucrative but by increasing the annual fee by $40. We can’t expect great benefits AND great earnings without a high annual fee. There is a point though in spending, when it doesn’t make sense. You are are now more likely to get a retention offer. If you spend $25K a year on the American Express Platinum of which only say $5K is bonused, that person is much more likely to get a retention offer vs the person who keeps the Plat card sock drawered except when they book airline tickets.
On a related manner, I had a retention call with American Express recently. They know which cards you use, and which ones you sock drawered after you got your bonus. American Express and other card issuers seem to be making spending more lucrative on some cards as they want you to stay and pay the annual fee. I’ve also noticed Chase and Citi, are become more selective on offering retention bonuses. Everyone needs to be ready for the new reality of earning points from gulp, spending and strategically buying miles/points.
I agree with Dave on the in advisability of individually putting spend on this card with no guarantee of later gratification. Maybe they should have structured the incentive differently (eg you get a 10k to 40k night cert with minimum $5k spend and an uncapped night cert with $12k in spend).
Or just do the Carlson deal and provide 40k points per year to use as one wishes.
Actually, that is one point I forget to put in (and will add now) – it is apparent that a card issuer looks at such a night as being worth an average of $10,000 in spend. IHG and Chase should have gone for that instead of wiping it out.
OK we all know that IHG points are almost worthless, maybe ½ of a penny. That is a horrible return. But they could have done what AMEX does with Hilton. You get 3x on regular spend, 6x or 7x on bonus categories and 12x or 14 at Hilton brands. So that is a card that you can actually use frequently. If IHG did that then they would have been my #1 card. But I’d rather put money on AMEX and citi since those banks offer retention bonuses. Chase doesn’t so there’s really absolutely no reason to use the IHG card outside of the IHG properties.
As far as putting $10,000 on IHG card in order to get a free night at a hotel plus pay an AF, I’d rather spend $10,000 on citi double cash back and get $200 an no annual fee or on SPG card for real value. Chase just doesn’t get it.
In my situation the changes overall are actually a plus. I am planning on retiring this year and will be able to ramp up pleasure travel significantly. With an IHG point nest egg in excess one million points, the new fourth night free benefit will far outweigh any limitations made on the one anniversary night.
A minimum spend would have been acceptable. I am one of the people who applied in 2017 and will never get the free uncapped night that the offer they mailed said I would get. I spend heavily on Chase cards or I did. Right now spending mostly on Amex cards because I am so mad at the way Chase and IHG went about this.
I don’t “sock drawer” cards but I may do it now with a Chase card, just to get back enough to cover the value they took.