Why I’m not getting the USBank Altitude Reserve, and other musings about credit cards

I’ll admit it, I was pretty excited about the new Altitude Reserve card from US Bank. Here’s a photo of it: you can tell it’s a big deal, because it’s black and it’s made out of metal.

us-bank-altitude-feat

The feature set on the card alternates between intriguing and head-scratchingly subpar. For instance, it earns 3 points per dollar on all mobile wallet transactions, which – assuming it doesn’t get nerfed – could translate into 3x on all spending as more and more merchants start accepting it. That’s innovative, to the point that a lot of people are saying that it’s unsustainable out of the gate. Then, you have the Priority Pass membership, which offers four free lounge visits per year and $27-per-visit thereafter. For a card to credibly take on the Sapphire Reserve, it can’t skimp on stuff like this – especially with so many cards offering unlimited memberships with free guest access.

Another weird restriction is that the card will originally be for USBank customers only. They’re claiming to take on the Sapphire Reserve, but they’re actively trying not to poach Chase’s existing customers. Makes sense? I just happen to have recently opened up a USBank card (the Korean Air Skypass Visa), so I’ll actually be eligible for the Altitude Reserve when it comes out on May 1st. Up until yesterday, my plan was to apply for it as soon as possible, but I’ve cooled on it after thinking about it further, and I have decided to wait for a while. Here’s why… and most of this is specific to me, but I’m also writing this out to enumerate why calling this card a GAME CHANGER may be premature.

1. The rewards program seems half-baked. USBank already has a convoluted rewards program in FlexPerks, which sets fixed-point redemption amounts across price bands, varying the value per point you get based on how close your redemption was to the top of its price band. (I don’t want to go into a detailed discussion of FlexPerks – if this doesn’t make sense, then my point about it being convoluted is correct.) This card will have an entirely new rewards currency that… wait for it… can be redeemed for 1 cent per point for cash or 1.5 cents per point for travel. Basically, they’re copying Chase’s Sapphire Reserve program, only without the transfer partners. If they’re going to be this non-innovative in the rewards space, earning 3x points per dollar doesn’t really matter that much.

2. I don’t have a phone that supports NFC payments. This is a big one – the main benefit of the card is entirely lost on me, except for things like in-app purchases, which I’ve spent maybe $15 on in the past year. I realized it doesn’t make sense to pay a $400 annual fee right now if I won’t be able to take advantage of the card’s main competitive advantage at least until November when my phone contract rolls over and I can get an iPhone 6.

3. Speaking of the $400 fee, despite all the perks and the $325 travel credit, the card isn’t fee-negative the first year (since the travel credit can only be used once per cardmember year). This is another disadvantage compared to the Chase/Amex/Citis of the world, all of whose cards have annual credits that can be redeemed twice in the first calendar year. While I certainly agree that these credits probably should be limited to one per cardmember year (at least from a revenue management perspective), the fact is that most premium cards offer an extended free trial period, and this one doesn’t. I know I could recoup most of the fee right away, but it’s still $400 I have to spend out-of-pocket right now, and that throws off my annual fee budget.

4. The minimum spend is high, and the sign-up bonus isn’t great: $4500 in three months for 50,000 bonus points (up to $750 in travel). Including the $325 travel credit and annual fee, the net is $675 toward travel for $4500 in spend. That’s good, but it isn’t other-worldly good. Barclay will give you $500 toward travel for $3000 spend and a waived annual fee. Capital One will give you $400. Neither is as good as USBank, but we’re pretty far from Sapphire Reserve 100k bonus territory here.

5. Getting back to the rewards program: the value of the 50,000 points depends on USBank’s booking engine. I happen to be planning a trip right now, so I’ve been using Chase’s Ultimate Rewards portal to look up prices for intra-Europe travel, and one thing I have noticed is that Norwegian doesn’t come up in the search results. That’s a big deal, based on this math:

  • Norwegian flight (AMS to CPH): $69 including bulkhead seat selection and checked bag
  • KLM flight: $126, plus $15 for a checked bag and $5 for a seat.
  • Assuming flying KLM doesn’t hold any benefit vs flying Norwegian (and in fact it’s worse, because I wouldn’t get a bulkhead seat on an economy fare), the actual value of the points I’d redeem is less than the 1.5 cents that Chase advertises. Given that I’d pay $20 in cash either way, the net value of the 8400 points I’d redeem for the KLM flight equals the difference between the Norwegian fare and $20, or $49. That drops the value from 1.5 cents per point to .058 cents.

Now, I realize this is a very specific example, but it underscores how proprietary rewards currencies – even when they have a fixed value – don’t always match that value in the real world.

6. Since I’m planning a trip right now, I also have to consider how my spending over the next few months can improve that trip – preferably through aspirational redemptions. Remember those? I got so wrapped up with this 1.5 cents-per-point bullshit that I forgot my travel philosophy, which is not necessarily to maximize return on spend to earn “free” travel, but rather to use points to unlock travel experiences that would otherwise be out of reach. Therefore, I find myself able to justify paying outright for piddly little positioning flights in economy if I can put $4500 of spend toward an aspirational redemption on the same trip. I’m not sure which direction I’m going to go here, but one option would be to open the Citi Hilton Reserve and the Amex Hilton – between the two (after exactly $4500 in spend), I could get three nights at the Waldorf Astoria Amsterdam, assuming there was availability (and there is, at least as of now). A few free flights around Europe or staying in the #1-rated hotel in Amsterdam? For me it’s the latter by a wide margin. I’m not 100% going to do that, but it’s a good example of how the USBank card doesn’t fully align with my immediate travel goals – at least not when I’m also required to drop $400 on an annual fee.

7. That leads me to the last reason I’m avoiding this card for now, which is that I’m betting on USBank improving the rewards program at some point. To wit: in interviews with travel bloggers, the USBank exec in charge of the card has repeatedly said that they’re considering transfer partners in the future. That’s quite different than saying that they will do it, but notice that he isn’t trying to defend Altitude points on their own merit either. There’s none of that “well, our points offer superior flexibility, they never expire, blah blah blah” doublespeak, suggesting that he realizes Altitude is a half-baked program and they’re going to have to add some features to it to really compete. Now, let’s say they do add a couple transfer partners in six months or a year – given that they’ve been very clear that the 50k bonus is a one-time deal, how pissed would I be if I pissed away my points pissing around Europe on short haul economy flights? PRETTY PISSED!

So, given all these factors – waiting to get a new iPhone, waiting to see if they improve the rewards program, and waiting until I’m not at a point where I’m deliberately focusing my spend toward aspirational redemptions in the immediate term – it definitely makes sense for me to wait for this card.

What about you, you hyper-intelligent commenters? Are you rushing out to get the card? Are you opening USBank accounts like mad so you can be eligible for it? Are you polishing your mobile wallet to prepare it for prime time? I’m curious what others (besides proficient manufactured spenders who are going to clean up with mobile wallet transactions) think about this card.

Oh right, I promised other musings about credit cards:

  • I will admit that part of my decision on the USBank card has to do with ongoing reservations about the aforementioned Korean Air card, which I still don’t know if I should have opened. I’m still working off the $3000 minimum spend on that one, and I have no use in mind at all for the miles I’ll get. As I’ve said repeatedly, if it’s a good deal and unlikely to be repeated, it’s probably worth doing, and I’m sure I’ll appreciate the points when I’m hanging with The Points Guy, Gary Leff, Lucky, and that guy with the stuffed monkey in Korean Air first class, but for now that remains my least thought-out mileage play. There aren’t any significant negative repercussions, but my takeaway from it is to think a little longer about where my spend could be going rather than toward bonuses for miles I don’t need and won’t use for a long time.
  • I closed my SPG Amex after trying a bunch of times to get a retention bonus and coming up empty. I don’t regret it (yet), although I will if they discontinue the card tomorrow and transition everyone over to a secret card that gives you Marriott lifetime platinum status or something.
  • I also closed my Citi Prestige card today, since I’ve had it for two years and never stayed at a hotel four nights in a row (that wasn’t an award stay). There goes the value proposition on that one! Plus, I’m not a huge fan of Thank You points (BUT THEY JUST ADDED JET AIRWAYS AS A TRANSFER PARTNER!!!!!!!!!!!!!!!), so the earn rate on the card wasn’t very exciting. Oh, and they’re slashing bennies right as Chase, Amex, and USBank are making the premium card space more competitive. The funny thing about my call to cancel, though, is that I was sure I wanted to get rid of it, so I tried to bypass the retention department. I remember this used to be an issue, where people would call in for retention bonuses and have their cards closed by the first-line rep. I got a retention bonus on it last year, and I had to do a very delicate dance in which I appeared serious about canceling it but really interested in maybe keeping it open if I got the right bonus. This time, the rep transferred me to retention without me asking, and the retention rep offered me something despite my saying I wasn’t interested. Not that it would have changed my mind – the offer was a $200 statement credit for an eye-watering $12,000 in spending (4k per month for 3 months). And then, when I canceled the card, she told me that I’d get around $75 back as a pro-rated refund of my annual fee. First, if I had known that Citi offered this, I would have canceled months ago. Second, think about the choice there: $12,000 spend for $200 off an annual fee for a card I didn’t want… or $75 free money to close it. SAD!

One thought on “Why I’m not getting the USBank Altitude Reserve, and other musings about credit cards”

  1. I’m leaning towards getting this card personally. Prior to maximizing my travel through credit card sign-ups about a year ago, my top-of-wallet choice was a crappy US Bank card that offered, at best, $.0067 per point in cash back or maybe $.0085 per point when redeemed for some gift cards or household products. I’ve had a checking and savings account with US Bank for close to 15 years and also have a car loan through them. They are my main bank.

    Before I got wise to maximizing credit card sign-up bonuses and bonus spending categories I was the ideal high profit margin banking customer. I feel like US Bank sees many of their customers fitting into this kind of profile and will market the Altitude card to this kind of customer. Remember, Minneapolis-based US Bank has a strong presence in the Midwest. Aside from my friends who are always trying to maximize their benefits, a vast majority of the people I know still use a debit card, use a 1% cash back credit card, or think that the Capital One Venture card is the epitome of a travel rewards credit card. They’re turned off by the complexity of variable value points and miles. The straightforward nature of cash back and fixed travel currency (like Venture, Arrival+, Discover IT Miles) is appealing. To your point, the US Bank FlexPerks system is too confusing, and I think US Bank knows that. I see this credit card appealing to two types of customers:

    1. Long-time US Bank customers who travel 1-4 weeks out of the year and want to feel special with a metal card and “huge” bonus categories (compared to their other cards in their wallet). This is US Bank’s ideal customer: Middle class/upper-middle class Midwest-nice folks who wants to impress their friends when they use a metal card and say they booked their vacation plane tickets with points!

    2. Credit card maximizers who see this card fitting in well with their arsenal of premium credit cards. They will max out the travel credit, gift Global Entry/TSA PreCheck to family/friends, and spend heavily in the mobile wallet 3x category, and maybe even pair it with a FlexPerks card that earns 3x on charity donations. Then when they redeem their rewards they’ll take a similar approach to Greg the Frequent Miler who has so many large-balance travel currencies at his disposal that he can cherry pick the best currency for the specific kind of travel. Refer to this post to see what I’m talking about: http://frequentmiler.boardingarea.com/2017/04/25/pay-more-25k-better-than-15k/

    The success of this card will depend on how many customers sign up for the card in each respective category. If you don’t fit into one of these categories you’ll probably pass on this card and look elsewhere. Seeing as how I fit into both categories, I’m 95% sure I’m getting this card on May 1st.

    Liked by 1 person

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