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.
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!)