Credit card perks we’re all paying for | EUROtoday

I’m standing in what looks like a collection in a complicated resort – all tender lighting, marble counter tops, plush seating and parquet-style flooring.

An ornate platter of meals catches the nook of my eye.

“That is a seafood tower as a welcome food amenity, as well as caviar, and you can also see the champagne there for guests to enjoy,” says Dana Pouwels, head of airport lounge advantages at US financial institution Chase.

She is displaying me round Chase’s new Sapphire Lounge at New York’s La Guardia Airport.

This is what ready to catch a flight can appear to be as of late – should you can afford to pay $550 (£433) a yr to have the right bank card required to achieve entry.

Then as soon as inside Chase’s new La Guardia lounge you may then select to pay as much as $3,000 to entry a non-public suite for a number of hours.

It is all a part of what has been described as a worldwide arms race among the many bank card firms that you’re most likely completely unaware of – they’re competing to outdo one another with larger, higher, bolder airport lounges.

And whereas most of us haven’t got entry to those lounges, consultants say we’re nearly definitely serving to pay for them. And they do not come low-cost.

“Yes, it’s an arms race, and they’re getting extraordinary,” says Clint Thompson, the information editor on the flight and journey web site The Points Guy. “From what we do know, we’re talking up to tens of millions of dollars per lounge.

“Like the brand new [American Express-owned] Centurion lounge in Atlanta, I imagine they spent about $100m to make that occur.”

Airport lounges aren’t a new concept, and credit card issuers have long teamed up with airlines to offer branded credit cards with lounge access.

But now the card issuers are building lounges themselves, as a way of directly appealing to card holders – and potential new customers too.

JP Morgan Chase, American Express, Capital One, they’re all now in the lounge – and lifestyle – business.

For American Express this includes opening a high-end lounge in midtown Manhattan.

Its Centurion New York venue is located on the 55th floor of a skyscraper, with floor to ceiling windows offering sweeping views of New York, and fine dining and private bars.

It’s designed for Centurion card holders – a card which will cost you $10,000 as a signing on fee, plus $5,000 a year. And it is invite-only to get one.

“We’re greater than a bank card firm or a cost card firm, it is extra a way of life model, getting you particular entry to concert events, getting you into eating places,” says Audrey Hendley, the head of global travel at American Express.

The card issuers have even moved into a 21st Century staple, the coffee shop.

Capital One have Capital One Cafés – now you have a barista in a bank.

Their branch in the Georgetown neighbourhood of Washington DC has all the classic signs of the hip coffee shop – exposed vents, bare brick walls, barista coffee machine.

The only immediate giveaway you might be in the bank is the neon Capital One sign on the wall and their branded touch screens. Look a bit closer, and you might spot one of their casually dressed people who looks like a customer, but is actually what Capital One calls their ambassadors, here to welcome you in and help you with all your banking needs.

Anyone can use the café, but hold a Capital One card and you get money off your brew.

“We’re making a showroom for our merchandise,” says Shaun Rowley the director of Capital One Cafes.

“For prospects to return in and see Capital One in motion, to the touch it, to scent it and even style it with our cafes. And watching them stroll out, as you understand, raving followers and advocates for us is form of the return that we’re in search of.”

None of this sounds like the sort of language you hear normally hear from financial institutions.

Dan Bennett is the head of behavioural science the ad giant Ogilvy. He says this is all about brands tapping into how people think about themselves, and other people.

“Yeah, it’s a piece of plastic with the chip in it that holds your cash, however it’s one thing that really provides you a place in society,” he says. “It is one thing that claims one thing about who you might be. It is one thing that may make you’re feeling elevated.

“The credit card firms are not just building rooms at airports, they’re building a sense of self. It’s kind of amazing that financial services companies have managed to kind of look at some deep-core human drivers, and then build experiences around that.

“And that is why they’re so profitable with them, as a result of they’ve managed to seek out the psychological levers to tug, quite than simply trying on the world via a rational lens.”

But even if you’re never going to get access to these places, you are ultimately still paying for them, according to Lulu Wang. He’s assistant professor of finance at Kellogg School of Management at Northwestern University near Chicago, and has studied how card payment systems work.

He points out that credit cards are more expensive for merchants, be they retailers, or bars and restaurants to accept than debit cards as they incur a higher processing fee.

Prof Wang says merchants are likely to put up prices to cover the additional cost of people using credit cards.

“We usually suppose that companies, you understand, they’re dealing with greater prices, they will cross on a reasonably substantial share of these prices onto customers,” he explains.

“If we impose all these prices on the service provider, it finally ends up being a value that’s finally borne by all of us as customers. Well-off individuals get to make use of the excessive service provider price, excessive reward playing cards, after which it is the remainder of society that has to bear that price.”

Whoever is picking up the cost, the direction of travel is clear. More lounges and lifestyle experiences are coming as card issuers compete against each other.

The arms race to get your credit card loyalty isn’t slowing down.