Friday, September 23, 2016

The Perfect High for Credit Card Junkies

Somewhere in the middle of Ohio there’s a nondescript office park, the kind you could drive by for years and never really notice. One of the buildings in that park is basically windowless; you might mistake it for a warehouse or, if you were feeling exotic, a data center. The only thing that’s remarkable about the structure, signaling there’s something of great value inside, is an imposing floor-to-ceiling metal turnstile in a guarded vestibule.

This building is a modern-day mint. It’s where JPMorgan Chase, the largest issuer of credit cards in the U.S., manufactures around 60 percent of the 95 million cards it issues each year. The company requires visitors to keep its exact location secret. For more than 15 years, the facility has hummed along, embossing numbers onto plastic cards and stuffing them into envelopes. During that time, only three things have really disrupted BAU, Chase-ese for “business as usual”: the Target data breach of 2014, which required the factory to quickly reissue millions of cards; the industrywide 2015 switch from magnetic-stripe cards to ones that include microchips; and in August the frenzied demand for the company’s newest offering—the Chase Sapphire Reserve.

Ned Lindsey, Chase’s managing director of customer fulfillment, runs the Ohio plant and a sister facility in Texas. On Aug. 24, Lindsey noticed something strange—card requests were coming in at an extremely high rate, all for the Reserve. “We were seeing demand that was eight- to tenfold more than what we expected,” he says. Lindsey, it seems, doesn’t read credit card blogs. Since July, a fever had been building on social media among points-and-miles obsessives aware that Chase was preparing a premium card—one that would sit above its already-popular Sapphire Preferred, and offer rewards to match. Almost a month before Chase introduced Reserve, the community discovered the card’s perks through some leaked information: a sign-up bonus of 100,000 points, triple points on travel and dining, airport lounge memberships, and credits that offset a $450 annual fee, among other goodies. Of course, like its Sapphire Preferred brethren, the card would have a weighty metal core that creates what is known in the trade as “plunk factor.” Plasticheads got the vapors. “When I first heard the details,” wrote Brian Kelly, aka The Points Guy, probably the most influential card blogger, “I had to sit down, because it sounded way too good to be true.” The Sapphire Reserve, wrote another, Ben Schlappig, is “beyond a no-brainer, possibly the most compelling card we’ve ever seen.” On Reddit, a user shared that Chase had accidentally published a Reserve application link, and thousands of applications poured in before the page was deactivated. By the official launch date of Aug. 23, anticipation had built to the point that the Chase site was bumrushed by a horde of deal-seekers.

In Ohio, Lindsey brought in extra staff and added shifts. “We had to have a backup plan to the backup plan,” he says. The plant ran hot for about three weeks. During that time, Chase burned through its inventory of metal cards—a stock that was supposed to last 10 to 12 months. (The company declined to say how many Preferred or Reserve cards it’s issued.) To continue to sate the appetite for the Sapphire Reserve, Chase had to switch to standard plastic cards as placeholders. The bank says it’s now sent out as many plastic cards as metal—two years’ worth of cards, gone in less than a month.

When the first cards were shipped, some customers posted “unboxing” videos on YouTube, reverently exhibiting terms-and-conditions pamphlets to the camera. The videos have garnered more than 60,000 views; the Reddit thread has 10,000 comments. The hype usually reserved for a new iPhone was now being applied to a high-interest line of credit. And until mid-September, Chase hadn’t spent a dime on advertising.

Chase is not the first issuer to offer a big-annual-fee-but-mucho-points card. American Express and Citibank have been playing in that part of the market for years. But Chase has entered at the right time—when a growing community of enthusiasts will do the company’s marketing online for free—and with the right card, one that assiduously checks every box the modern credit card deal-hunter cares about. None of this happened by accident. The process to create new credit cards is little different from the research Procter & Gamble does to develop a new laundry detergent or Honda does to develop a new crossover SUV. A credit card is a means of payment and the extension of a loan, but it’s also a collection of perks and points that confer experiences and status upon its user, as well as an object people typically touch several times a day. In a country with more than half a billion credit cards already in circulation, it’s not a given that any new combination of attributes will work.

Chase had already learned a thing or two about how to make a card more than a card. The Sapphire Preferred, introduced in 2009 with a $95 annual fee, was the reigning “It card” before Reserve came along. One especially devoted cardholder is Bryan Denman, a 35-year-old New York creative director, who has taken advantage of Preferred’s perks to treat his girlfriend to Chase-sponsored private dinners at the restaurants Craft, Rebelle, and Le Bernardin, as well as to get good seats at venues like Madison Square Garden. Denman recognizes that loyalty to a credit card is unusual. “Everyone’s brought up to distrust their credit card company,” he says. “You don’t want to be on the phone with them; why would you want to spend the night with them?” But his experiences with Chase have conferred upon Denman the zeal of a convert. “I am a complete fanboy,” he says. “I’m telling everyone to get this card.” He’s not alone. “When I go to dinner, there might be three cards that get thrown down. They’re all Chase Sapphire.”

by Sam Grobart, Bloomberg |  Read more:
Image: Finlay MacKay