Credit Card Incentives
Overall, in looking at credit card incentives, there are trends towards higher cash back or rewards points, from 1% to 1.5%, as well as mobile self-service to make access to rewards more convenient for customers. The initial rewards bonuses have seen significant changes where miles/points bonuses have fallen by 17.82% but cash-based bonuses have risen by 14.42% in the calendar year of 2017.
Issuers are battling to draw more customers to the credit cards that they offer. This has resulted in certain shifts in their incentive programs. Some of these shifts have trended towards making what was offered previously even bigger, and some have been new offerings to entice customers. Seven of these trends are listed below:
1) Higher Reward Points for Cashback
There has been an increased focus on cash-back rewards systems. People love cash. For cash-back cards, overall customer satisfaction is highest. Customers received 1% of their total transactions in cash back from their credit card issuers at one point, however due to bonus reward categories, that has risen to 1.5%. There has been a push towards more simple cash-back rewards. Credit cards with a fixed rewards rate of 1.5% to 2% back on all purchases, provide a level of simplicity that consumers like.
2) CoBranded Rewards Cards
In 2018 there are new ways to redeem your rewards. These rewards are being catered to your lifestyle as credit card issuers are getting more creative. New offerings include a $200 per year Uber credit for American Express Platinum cardholders or 50% off a Spotify Premium subscription offered to Quicksilver customers of Capital One.
The expectation is that reward-partnerships with popular brands will continue in 2018. These brands are loved by card issuers because they are recurring charges that are sticky and are habit forming.
One exciting introduction was branded credit cards for Amazon, Uber and Starbucks, all of whom partnered with credit card issuers. The focus on lifestyle is evident.
3) Travel Rewards
Five-figure travel point initial offers with generous travel perks are not going anywhere for now as issuers create new cards and try to entice new customers. However, the days of 100,000 point sign-up bonuses seem to be at an end after profits for issuers like Chase had their profits eaten into by this bonus.
Still, the redemption of travel rewards points is still the best deal. Travel rewards yield 30% more value than redeeming for merchandise which is the worst redemption option.
4) Mobile Wallets
There has been a reluctance by customers to adopt mobile payments and this is expected to continue into 2018. This is despite the fact that banks and stores are issuing even more mobile wallets. Issuers like Chase Freedom have incentivized their users with 5% cash back when they pay with their mobile wallets in quarter one, 2018. Other issuers like U.S. Bank and Wells Fargo have followed suit with such incentives for utilizing mobile wallets for transactions.
The belief though, by experts, is that retailers who have created their own virtual wallets have a distinct advantage in the mobile payments game.
5) Long-Term Customer Loyalty
For years the focus has been on the short-term customer. Credit card issuers have used big signup bonuses to attract new clients, however this does nothing for the long-term customer. This trend has begun to change and will get even bigger in 2018 as credit card companies will focus on tiered reward systems to reward their long-standing customers. Improved customer service is another strategy to promote loyalty.
6) Bigger Perks for Premium Cards
People always love more perks and those with the higher-rewards credit cards are projected to get even more perks. From spa upgrades to first class treatment as well as travel credits, more miles and other bonuses this is a highly competitive market for credit card issuers. The sky is the limit when it comes to luxury travelers and their premium rewards because they are willing to pay up to $500 in annual fees on their premium cards. Expect this competition to intensify in 2018.
7) Hotel & Dining Rewards
The hotel loyalty programs with the highest satisfaction are ones that let their members redeem rewards for dining, product purchases and special events. A great example is Hilton's Honors program that introduced several new features like points pooling, booking accommodations with a combination of cash and points and even allowing members to pay for their Amazon purchases with their rewards points.
As more Americans are dining out than in past years, this has caused a trend where credit card issuers are offering higher rewards for dining and food-focused cards.
To wrap up, there is a continued trend towards higher payouts in rewards points or cash back as this jumped from 1% to 1.5% of total transactions. Mobile self-service is increasing by issuers to make it more convenient for customers to access their points as well as know what deals are available where. Also, everyone loves more cash and issuers are taking notice where cash-based bonuses have increased by 14% while miles/points bonuses have decreased by 17%.