# Luxury lounges: Credit card perks 'we are all paying for'

I'm standing in what feels like a suite in a posh hotel - all soft lighting, marble counter tops, plush seating and parquet-style flooring.

An ornate platter of food catches the corner 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 benefits at US bank Chase.

She is showing me around Chase's new Sapphire Lounge at New York's La Guardia Airport.

This is what waiting to catch a flight can look like these days – if you can afford to pay $550 (£433) a year to have the correct credit card required to gain entry.

Then once inside Chase's new La Guardia lounge you can then choose to pay up to $3,000 to access a private suite for a few hours.

It is all part of what has been described as a global arms race among the credit card companies that you are probably entirely unaware of – they are competing to outdo each other with bigger, better, bolder airport lounges.

And while most of us don't have access to these lounges, experts say we are almost certainly helping pay for them. And they don't come cheap.

" Yes, it's an arms race, and they're getting extraordinary," says Clint Thompson, the news editor at the flight and travel website The Points Guy. "From what we do know, we're talking up to tens of millions of dollars per lounge.

"Like the new  Centurion lounge in Atlanta, I believe they spent about $100m to make that happen."

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 more than a credit card company or a charge card company, it's more a lifestyle brand, getting you special access to concerts, getting you into restaurants," 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 creating a showroom for our products," says Shaun Rowley the director of Capital One Cafes.

"For customers to come in and see Capital One in action, to touch it, to smell it and even taste it with our cafes. And watching them walk out, as you know, raving fans and advocates for us is kind of the return that we're looking for."


The American Express Centurion in New York is located on the 55th floor of a skyscraper

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 is a piece of plastic with the chip in it that holds your money, but it is something that actually gives you a position in society," he says. "It is something that says something about who you are. It is something that can make you feel 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's why they're so successful with them, because they've managed to find the psychological levers to pull, rather than just looking at the world through a rational lens."


Shaun Rowley says that the aim of the new cafés is to turn customers into "raving fans and advocates"

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  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 typically think that corporations, you know, they're facing higher costs, they're going to pass on a pretty substantial share of those costs onto consumers," he explains.

"If we impose all these costs on the merchant, it ends up being a cost that is ultimately borne by all of us as consumers. Well-off people get to use the high merchant fee, high reward cards, and then it's the rest of society that has to bear that cost."

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.
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