The news: Cardholders who pay an annual fee report higher satisfaction with their financial product than those carrying no-fee cards, per J.D. Power’s US Credit Card Customer Satisfaction Study. 

However, cardholders who paid $500 or higher were less satisfied with the reasonableness of the annual fee compared with cardholders who paid $500 or less.

Warning shot: The $500 annual fee meridian line is a cautionary tale for credit card companies, especially for those in the midst of refresh campaigns. 

Numerous premium card products have blown past that threshold in their new rollouts:

• Chase Sapphire Reserve. $795
• Citi Strata Elite. $595
• Amex Platinum. Currently $695—and rumored to climb as high as $895 with its impending relaunch

Why issuers may limit access: Premium portfolios like Chase Sapphire Reserve are trying to get some cardholders to trade down to return a sense of exclusivity to their portfolio, especially under complaints of airport lounge overcrowding. 

Portfolios are chasing wealthy cardholders’ spend because they show no sign of slowing down their consumer habits. Amex’s Q2 earnings showed that wealthy travelers are still buying front-of-cabin seats and luxury hotel bookings. These are cardholders who are far less sensitive to price hikes—or who use the cards enough to feel the cost is more than justified.

Our take: Chasing too quickly after the most premium cardholders risks disenchanting young, upwardly mobile professionals in the millennial and Gen Z cohorts. 

If these elite cards want cardholders who can grow across their financial lifetimes with their products, they need to avoid hollowing out the middle between their elite and entry-level cards. 

Issuers are still being picky when approving new cardholders, but when they decide to loosen their underwriting standards, they need to make sure they have products that appeal to consumers who are willing to pay for a card but who would be put off by exorbitant fees. They can follow Amex’s playbook here—leaning into exclusive experiences that offer value without a direct monetary reward, versus trying to compete on ever-higher cash-back rewards.

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