The news: Southwest Airlines made sweeping changes to its Chase co-branded credit cards, per a press release.

• Higher annual fees. Southwest raised the five credit cards’ annual fees by an average of 50%.
• Bonus points. New applicants can earn 100,000 Rapid Rewards points if they sign up by September 17 and spend $4,000 in purchases within four months.
• Free bags. Southwest did away with free bags for travelers, but credit cardholders will receive the benefit for themselves and up to eight travelers flying under the same reservation.
• Seat selection. With Southwest’s new assigned seat policy, cardholders can pick where they sit in advance. Premium members can also request extra legroom seats for free.
• New spend categories. Southwest terminated its rewards categories for local transit, commuting, ride-hailing, internet, cable, and phone services for most of its portfolio. New categories include dining, groceries, and gas divisions. 

Behind the strategy: Southwest is following the formula from Chase’s recent Sapphire Reserve refresh—hiking annual fees and deepening the bench of perks. 

Incorporating everyday spend categories of groceries and gas reflects Southwest's pitch to be consumers’ primary card across small- and high-value transactions.

Our take: Southwest cardholders are essentially earning back classic Southwest perks stripped from regular travelers. The airline likely could use the gains from higher fees on its credit cards: the budget airline sector stands to struggle as lower income Americans tighten their purse strings for personal travel—and Southwest earned 13% of its revenue from its co-brand cards in Q3 2024. 

Asmacroeconomic conditions rock airlines, Southwest’s new lineup may alienate longtime flyers who will lose some of those perks, but the airline may be able to get those flyers and others to open a card to get those luxuries back—earning from them via fees, interchange, and rewards.