X1+, A Credit Card For When Things Go Wrong On Travel

There is a new credit card on the market for when things go wrong on travel.

X1 introduced a new iteration of its credit card portfolio, the X1+ card. Here are a few headline attributes:

$75 annual fee card.

Worldwide Lounge Access for Flight Delays: X1+ will be the first U.S. Visa credit card to offer complimentary lounge passes worldwide for members and up to 4 additional passengers if a flight is delayed by one hour or more.

On-Demand Lounge Access: X1+ will be the only credit card to enable on-demand lounge pass purchases, so cardholders can access more than 1,000 Priority Lounges.

Smart Baggage Protection and Enhanced Coverage: If baggage is delayed, cardholders get $100 per day in protection for 3 days. If baggage is lost, cardholders get $3,000 in protection per trip. Trip cancellation coverage is up to $5,000 per person per trip, and the card acts as the primary insurance for domestic and international car rentals. The card also comes with enhanced purchase protection at $10,000/occurrence, including Porch Piracy, with a limit of $50,000 per cardholder.

Rewards

• 2X points on every purchase regardless of category
• 3X points every time you spend $1,000 in a month
• 4X points on Expedia, Hotels.com and VRBO
• 4X, 5X and even 10X points for every referral who gets a card
• Up to 10X points at leading online stores such as Apple, Nike and Sephora when cardholders shop in the X1 App

Let’s analyze these benefits and see if it’s worth paying $75 a year.

2x points on every purchase is similar to set-and-forget cash back credit cards with no annual fee on the market. Examples include PayPal Mastercard Credit Card, Apple Card on Apple Pay, Synchrony Premier World Mastercard, FNBO Evergreen and Wells Fargo Active Cash Card. Because these cards don’t require any annual fee, the 2x cash back on every purchase becomes table stakes, not what consumers should pay $75 a year for. Additionally, some of the aforementioned cards such as FNBO Evergreen or Active Cash Card also has an intro and a bonus offer. To compete, X1+ must bring something else to the table.

3X points every time a customer spends $1,000 a month is an intriguing benefit. The fine print on rewards terms stipulates that the higher rewards earn rate only applies for spend between $1,001 and $7,500 in a calendar month. Any dollar beyond the $7,500 mark will earn 2 points. Here is a concrete example. If you spend $1,000 within the first month of Jan 2023, you’ll earn 2x points on that amount. Between the 6th and 25th of January, you spend another $6,500 which will accrue 3x points. For the last 6 days of the month, you spend another $500 which earns 2x, instead of 3x, points.

Based on those terms, if a customer wants the extra 1 point per dollar to pay for the annual fee, they will have to spend at least $750 a month for 10 months. The math is that $750 (the amount after the first $1,000) x 1 (the additional rewards earn rate) x 0.01 (100 points are worth $1) x 10 (number of months) = $75. Let’s say that a customer narrows down his or her next credit card to one between X1+ and one 2% cash back with a $200 bonus and no annual fee. Choosing X1+ would mean potentially losing $275. How can they make that up with the extra point from X1+? By spending at least $3,750 a month. In that case, after 10 months, they will recoup that investment ($2,750 x 1 x 0.01 x 10 = $275).

As a result, consumers who plan to spend between $1,750 and $3,750 on a credit card for the better part of a year will find the 3x points benefit of X1+ worth paying $75 in annual fee for.

Reading the press release, I suspect that access to lounges is the leading selling point of this credit card. Although the press release doesn’t mention which lounges X1+ cardholders may have access to, NerdWallet reports that it’s none other than Priority Pass Lounges. Here are a couple of things about these lounges:

• If you reside in the US, it costs $99 a year to join the Priority Pass community and a further $35 for each visit to a lounge. Pay $329 a year and you can get 10 complimentary lounge visits. $469 a year will get you unlimited free lounge visits
• Priority Pass Lounges are located at major airports in the US and numerous locations in the world

Based on how Priority Pass Lounge access is priced, a couple of visits are already worth the annual fee, especially if you don’t fancy joining the Priority Pass network every year. The catch here is that complimentary access only comes when your flight delay lasts more than an hour. In other words, you have to rely on things going wrong to enjoy this benefit. According to the Bureau of Transportation, 20% of the domestic flights in US between January and October 2022 had at least a 15-minute delay. Once data for the holiday comes in, I suspect the share of delayed flights will increase due to unprecedented delays and cancellations that airlines had to make. It’s safe to assume that a consumer has like 5-10% of having a flight delayed for more than an hour.

As a result, X1+ cardholders that don’t travel frequently may not have a chance to use this benefit that the card offers. But compared to the high annual fee that other premium travel credit card like Amex Platinum command, it’s a reasonable trade-off: a low annual fee with no guaranteed lounge access for a high annual fee with guaranteed access. X1+ is clearly positioned as an alternative for the premium credit cards already on the market.

Other benefits such as baggage delay or trip cancellation insurance is at best another table stakes and not differentiated from competition. Plus, these benefits only kick in when customer trips hit speed bumps, reducing their appeal to customers who likely prefer smooth travel.

In short, X1+ has some pretty unique selling points such as access to lounges or 3x rewards. The card, in my opinion, appeals most to high-spending folks that can spend at least $1,750/month for most of a calendar year. Another group that may find this card attractive is frequent travelers that want peace of mind yelt balk at paying a high annual fee upfront. If X1 manages to add more names to the list of 4x rewards merchants, the card will become more attractive. I suspect that the 4x merchants subsidize rewards expenses in exchange for additional sales. Once X1+ grows to a certain point, it will be easier to sign up more vendors.