Amex Still King Of Premium Credit Cards — But Chase, Capital One Are Closing In Fast: Analyst

BofA Securities analyst Mihir Bhatia said the U.S. premium credit card market is highly lucrative and one of the most competitive card markets in the world.

The analyst surveyed 2,555 individuals to gain insights into how they view premium credit card brands, what rewards are most valuable and how they use their cards.

About half of the survey respondents held a credit card with an annual fee, but only 13% of total respondents held cards with yearly fees greater than $250, which he considered “premium credit cards.”

Also Read: American Express’ Solid Revenue, Spending Trends Drive Analyst Optimism

Bhatia noted that American Express Co (NYSE:AXP) is widely viewed as the most premium credit card brand among respondents in his survey, with 62% of respondents (64% in the fiscal 2023 survey) associating the brand with premium cards.

However, the analyst said JP Morgan Chase & Co (NYSE:JPM) and Capital One Financial Corp (NYSE:COF) have closed this gap, as those issuers were selected 50% and 43% of the time, respectively.

He said this contrasted with his 2023 results.

Bhatia noted that brand perceptions for Capital One (+19%) and Chase (+7%) have improved sharply.

The analyst noted that those with a premium card were already more likely to view these brands as premium.

Overall, the results suggest Amex is still viewed as an aspirational premium brand, but other issuers are gaining ground, he said.

Consumers applied for their premium card primarily to upgrade the rewards they were earning on their prior card (55% of respondents), followed by wanting to change the type of rewards, and trusting the brand, both at 44% of respondents, Bhatia noted.

The analyst noted that card points were the highest-valued credit card rewards category among premium cardholders by a wide margin.

However, among all cardholders who completed the survey, he said cash back was the most valued reward at 70% of respondents, and the closest response was card points at 37%.

Bhatia added a special question to gauge consumer opinions about Discover.

It was noted that 65% of all respondents and a surprising 79% of those with a premium card are open to getting a Discover brand card, the analyst noted. However, he said 44% of all respondents cited concerns about Discover card acceptance. Bhatia noted that this number increased to 73% when looking at those who already have a premium card.

So, while industry data suggests Discover has parity acceptance with Visa Inc (NYSE:V) or Mastercard Inc (NYSE:MA), the analyst noted that Capital One will likely need to make significant investments to close the perception gap, particularly to attract premium cardholders.

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