- JPMorgan Chase last year piloted an experiment offering a large rewards bonus to Sapphire customers who closed a mortgage with the bank.
- The bank says the promotion was so popular that it doubled the number of homes bought by the Sapphire population compared with the previous year.
- Now, JPMorgan Chase is reviving the promotion and expanding it to its Freedom and United Mileage Plus cardholders.
Last year, ahead of the spring homebuying season – the busiest of the year – JPMorgan Chase engineered an experiment to gain an edge in the mortgage-lending competition.
Coming off the heels of the massively successful launch of the Chase Sapphire Reserve credit card in August 2016 – a card that offered a 100,000-point sign-up bonus that stoked unprecedented demand – the bank’s home-lending executives had an idea.
A juicy rewards bonus enticed millennials into signing up for a premium credit card with a $US450 annual fee, previously considered a nonstarter among that demographic. Would a similar strategy encourage more millennials to take out a home loan with JPMorgan too?
“Given the overwhelmingly positive response of the Reserve card, it immediately became clear that we should consider some type of points offer,” Amy Bonitatibus, the chief marketing officer for Chase’s home-lending division, told Business Insider.
So the bank targeted its Sapphire customers, offering another 100,000 in rewards points if they closed a mortgage with the bank – a bonus worth as much as $US1,500.
The response was enthusiastic. The number of loans taken out by Sapphire cardholders during that three-month window doubled compared with 2016, Bonitatibus said. (The bank says that figure takes into account, as a baseline, new Reserve customers who bought a home in the year before joining the Sapphire community.)
Because of the promotion’s success during last year’s homebuying season, it’s no surprise that JPMorgan on Monday announced it would revive it.
“Given the popularity of points as an offer that we saw from last year’s test, we wanted to use that same currency for this year’s offers,” Bonitatibus said.
The bonus rewards are lower this year, but the offers expand beyond the Sapphire community to several other Chase credit cards, targeting a much broader audience of potential mortgage customers.
JPMorgan will offer tiered bonuses ranging from 25,000 to 75,000 points or miles for cardholders who open a mortgage with the company.
The Sapphire Reserve and cobranded United Mileage Plus Club cards offer the highest bonuses, while people with the Chase Freedom card – the largest and most diverse population of JPMorgan cardholders – can earn smaller rewards.
“Freedom is going to give us the broadest customer base, with a wide range of backgrounds, income, and lifestyles,” Bonitatibus said.
Marianne Lake, JPMorgan Chase’s chief financial officer, foreshadowed this expanded promotion during JPMorgan’s investor day in February.
The company has repeatedly touted its ambition to tighten its relationship with the Sapphire community, and given the promising results from targeting Sapphire Reserve customers with mortgage offers, Lake told investors they “should expect more of that in 2018.”
There’s plenty of opportunities left to mine in home lending. JPMorgan banks about 60 million households, only half of which have mortgages and less than 10% of which have a mortgage with JPMorgan, according to Bonitatibus.
“We have a tremendous opportunity to deepen relationships with existing customers,” Bonitatibus said.
Though they were once thought to be uninterested in buying homes, millennials – many of whom are finally ridding themselves of crushing student loans – represent a giant and growing segment of homebuyers. First-time homebuyers, who are primarily millennials, accounted for 38% of all single-family-home purchases last year, the largest share since 2000, according to Bloomberg.
The Sapphire Reserve population represents a natural starting place, as the card is popular among wealthy millennials. The average Reserve customer has an annual income above $US180,000 and more than $US800,000 in deposits and investments. They’re likely to have no problem affording a home when the time comes.
“With millennials being the fastest homebuying population today, that’s one that we’re focused heavily on,” Bonitatibus said, noting that millennials make up more than one-third of JPMorgan’s home-loan originations.
Of course, many millennials aren’t captured in the Sapphire cohort, and many homebuyers aren’t millennials.
And while older generations aren’t nearly as likely as millennials to appreciate travel rewards, they’re fond of redeeming credit-card points for cash and gift cards, Bonitatibus said.
“While points for Sapphire cardholders are largely redeemed for travel, for Freedom customers you see a wider use for the points,” Bonitatibus said.
She added: “We didn’t want to design an offer that only appeals to millennials, but certainly that does capture that millennial audience in addition to the other customer segments.”
Because closing costs on a home can easily run into the thousands, Bonitatibus thinks that “the cash-redemption offer is going to be particularly of interest” to many cardholders.
The credit-card promotion, which runs until the end of August, isn’t mutually exclusive from other Chase home-lending promotions, such as those available to Chase checking and Chase Private Client customers.
Customers are thus encouraged to enroll in a wide array of the bank’s services – all part of JPMorgan’s plan to deploy its most popular commercial offerings as gateways to the rest of the JPMorgan experience.
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