By AnnaMaria Andriotis
For more than 20 years, Laura Chapman routinely charged thousands of dollars a month on her American Express Co. Platinum card.
The 57-year-old travel agent's income and spending took a dive after coronavirus made the kind of business trips and vacations she booked all but impossible. She canceled the card when AmEx charged her the $550 annual fee.
"I thought 'that's it I'm done,'" said Ms. Chapman, who is still paying off her balance on the card. "The card won't be worth it."
Ultra-premium rewards credit cards aren't as rewarding these days. Banks have spent years fine-tuning the cards to appeal to big-spending jet-setters, offering generous sign-up bonuses and extra points on airfare, hotel stays and restaurant meals. Travel bans and social distancing have made those perks less appealing, leading some customers to question if the cards are worth their hefty annual fees.
Banks are scrambling to keep those hard-won customers. JPMorgan Chase & Co. delayed a planned $100 increase on Sapphire Reserve's $450 annual fee. It is also doling out extra points on grocery purchases through the end of June. Citigroup Inc. rolled out extra points on online grocery, drugstore and other purchases made with its premium Prestige card through August. AmEx is offering consumers who have the Platinum card up to $320 in statement credits when they use their card to buy certain streaming and wireless-phone services.
A pandemic that has grounded flights and closed borders is the biggest test to date for this slice of the credit-card business, which has helped banks deepen their relationships with wealthier consumers. And, as millions of Americans are skipping their debt payments and banks are setting aside billions of dollars to cover potential losses on soured loans, it is a revenue source they can ill afford to lose.
Doling out extra points for groceries and other everyday expenses could become costly for banks.
"These aren't minor changes," said John Grund, a managing director of payments at Accenture PLC. "Most issuers are trying to stay top of wallet until they get line of sight as to whether they have to do something more dramatic."
The coronavirus shutdown drastically altered consumer spending. Credit-card spending was down 21% in the U.S. in May from the same time a year ago, according to Visa Inc. Travel spending on credit and debit cards fell more than 70% in May, Visa said, while food and drugstore spending increased more than 20%.
"The Amazons, Netflix, Walmarts, Targets are up, groceries are up. And then obviously restaurants, travel, airports are down 95% or something like that," James Dimon, JPMorgan's chief executive, said at a conference in late May.
So far, card issuers say they aren't seeing an increase in cancellations, though some customers have switched to other cards with low or no annual fees and less generous rewards. The new reward offerings, they said, are meant to better align the cards' benefits with their customers' new spending habits.
"Given the fact that things like our...lounge collection are not particularly useful right now for most of our card members, we've added different benefits that are more appropriate to today's environment on a temporary basis," Jeffrey Campbell, AmEx's finance chief, said at a June conference.
Claire Lee downgraded her Chase Sapphire Reserve card to the bank's Freedom card in April to avoid the annual fee. The 24-year-old technology product manager said she charged about $100 on the card in April, a 10th of her pre-pandemic spending.
In the year she had it, Ms. Lee said she booked around a dozen trips on the Sapphire Reserve. She used it a few times a week at restaurants and to pay for parking near her office. Now, she is working from home in Los Altos, Calif., and cooking most of her meals.
"I buy groceries more than I ever bought in my life," said Ms. Lee. She said she plans to go back to the Sapphire Reserve when it is safe to travel again.
Travel rewards cards have bounced back from other shocks, including the Sept. 11 terrorist attacks and the 2008 financial crisis. This time is different. Coronavirus is still spreading rapidly in many parts of the world and, absent a vaccine, it is hard to predict when travel will return to pre-pandemic levels.
Banks are developing cards with lower annual fees that emphasize food delivery, streaming services and home renovation, according to people familiar with the matter. They are weighing adding rewards benefits for national parks, campgrounds and museums in an effort to branch out beyond airlines and hotel chains, the people said.
Meanwhile, card issuers are paying up to keep their best customers.
Zakeel Gordon said he called AmEx in March to downgrade his Platinum card to a Green card. He said AmEx offered him a statement credit of $500 to cover most of his annual fee, and he accepted.
The 25-year-old Seattle resident said his monthly spending on the card has fallen to about $500 from around $3,000 and that he has shifted most of his spending to cash-back cards.
When Andrew Loo called AmEx in June to cancel his Platinum card, he said a customer-service representative offered him 50,000 points to keep it -- enough, in normal times, for one or two round-trip domestic flights.
Mr. Loo, a 32-year-old IT project manager, decided to keep the card and redeem the extra points for travel later. But he isn't sure it is worth it.
He said he had upgraded to Platinum from the AmEx Gold in November, in preparation for a busy travel schedule after his wedding.
Mr. Loo's wife has been furloughed since March, and their trips have been canceled. Restaurant meals have been replaced with trips to the local Target. He has little use for the Platinum card's Saks Fifth Avenue and Uber Eats perks.
"There's really nothing the card is offering me," he said.
Write to AnnaMaria Andriotis at email@example.com