Rising fees force premium credit-card holders to choose sides

For nearly a decade, Jeff Brenner carried two premium credit cards without giving much thought to the fees. Then in June, JPMorgan Chase raised the annual cost on his Sapphire Reserve card by 45% to $795 and American Express teased something similar on his Platinum card.

Like many frequent travelers, he still wanted to keep a premium card for lounge access, but he couldn’t justify two. So the 62-year-old from Arizona made a spreadsheet comparing the perks he was getting on each card against his own spending.

The choice was clear: Get rid of the Platinum card before his annual fee goes up 29% to $895 next year and shift most of his estimated $8,000 to $10,000 in monthly spending to his Sapphire Reserve.

The refreshed premium cards rolled out over the past few months by the likes of Chase and Amex are prompting a reshuffling among affluent consumers. Many with multiple high-fee cards are choosing one, and shifting their spending accordingly. They don’t want to pay more than $1,000 in annual fees only to receive two sets of complex perks that require meticulous tracking.

“I have to draw the line at some point," Brenner said.

For card issuers that earn interchange fees with every swipe, it means a race to become the one card that high-spending, low-risk customers can’t live without.

People who pay more than $250 a year in credit-card annual fees make up less than 15% of all cardholders, according to Bank of America. But they are sought after because they tend to be bigger spenders, driving a significant share of the consumption that fuels the American economy.

Cardholders with annual fees above $500 spend an average of $2,736 a month, nearly three times as much as those with cheaper cards, according to J.D. Power. What’s more, only about a quarter carry debt from month to month, making them less risky than lower-fee cardholders.

“The average American sees a $600 or $800 annual fee and just says, ‘No’ right off the bat, but that’s not who these cards are for," said Matt Schulz, chief credit analyst at LendingTree, a personal-finance site.

Issuers are sending more aggressive offers to affluent Americans in hopes of locking in their loyalty. Over the years, Michael Kerr’s mailbox has been stuffed with offers promising generous sign-up bonuses and exclusive perks. That is how he wound up carrying both the American Express Platinum and the Delta SkyMiles Platinum Amex cards.

But when the rising fees pushed him to scrutinize his wallet, he noticed his two cards overlapped on several benefits, including credits for TSA PreCheck and baggage fees. He figured he was effectively paying for these perks twice.

His $350-a-year Delta card didn’t include lounge access—his most valued perk—but by upgrading to the $650 Delta SkyMiles Reserve Amex card, he could access Delta’s network of lounges. So he upgraded the Delta card and dropped the non-airline Platinum.

“I’m going to leverage every single one of those benefits on one card," Kerr said.

A third of the people who use travel-rewards-tracking site points.me have two or more cards with an annual fee over $150.

Analysts expect the higher fees to benefit issuers overall. Bank of America data show Amex’s retention rates improve after fee hikes, despite initial investor concerns. J.D. Power surveys also suggest that while high-fee cardholders are less satisfied with the reasonableness of their annual fee, they report higher overall satisfaction with their cards than peers with cheaper or no-fee products.

Though many cardholders bristled when Amex announced last month it was raising the annual fee on the Platinum by $200, several said they appreciated the added rewards like the $600 hotel credit and $400 dining credit. After reviewing the new rewards, Steve Hundley, a retired consultant from St. Louis, decided to close his Citi AAdvantage Executive World Elite Mastercard, which cost $770 a year, including a fee for adding authorized users. He decided to focus on getting the most out of the Amex Platinum card he has had since 2006.

“I hated the fee increase," he said about his Amex. “But I did like the extra benefits."

Issuers also have plenty of tools to keep customers from walking away. Before canceling, some customers ask to have the annual fee reduced or waived, LendingTree’s Schulz said. Roughly 95% of cardholders who make such requests get their way, a LendingTree survey found earlier this year.

That is what happened to Felix Baum, a 35-year-old professor at the University of Indianapolis. After Amex announced the Platinum fee increase, he figured it made sense to cancel his $325-a-year Amex Gold card and concentrate on the pricier option. But when he called, customer service offered him a deal he couldn’t refuse: a $200 statement credit in exchange for spending $2,000 within three months, effectively reducing the fee on the Gold card to $125. Baum decided to keep the card for now.

“I plan on calling them back to cancel in a year, " Baum said.

Write to Imani Moise at imani.moise@wsj.com