WHEN AND WHY CUSTOMERS USE AND CHANGE TRAVEL CREDIT CARD PROVIDERS

•  Dynamic Pricing: This refers to unpublished prices that change without notice making it harder to “rack up” air miles/points to put toward a specific trip. Many consumers change to a card with an airline that will publish prices.
• Airlines (United, Delta) have stopped publishing their reward charts, which may result in lower awards as availability and award prices increase. Many change to airlines that publish their reward charts.
• Airlines are reducing or eliminating benefits. People may change cards to get better benefits.
• American Airlines no longer has a rebate program (credit up to 100,000 miles when you redeem from mileage balance).
•  No Fee Cards: Many people change their travel credit card provider so they have a no-annual-fee card (American, Delta, and United). This is good for the occasional traveler who can benefit from the card but doesn’t need to be a frequent flyer.
• Perks: In order to get the highest or best perks, consumers often have to pay to be in a higher tier with the airline program. This often means having to have a higher annual fee. People may change cards to get better or specific perks.
• Smaller airlines (such as Frontier Airlines) have introduced travel cards that offer 1 mile for every $1 you spend anywhere you shop. Flying + card spending = 100,000 miles can mean all flights are fully refundable. People may use or change their card provider to earn miles with everyday spending.
•  Higher Interest Rates: Cardholders need to watch for higher interest rates—if you don’t pay off the balance each month, the rate may wipe out the mileage balance on the card and they might change cards to get lower interest rates.
•  To get low spending minimums: In order to get perks or the sign-on bonus, cardholders have to spend a minimum amount on the card. Cardholders may change card providers to get lower spending minimums to get to perks faster.
• To have no foreign transaction fees: When traveling overseas, you can get the best exchange rates with your travel card and often get no overseas transaction fee.
• To avoid blackout dates or fees, people will change cards so they have maximum days open for travel.

SPENDING AND PURCHASE PATTERNS

•  35% of Americans have a travel credit card that earns points or miles.
• To get maximum benefits and rewards with travel cards, cardholders are advised to use the card for everyday spending (gas, restaurants, bills, groceries, etc.) Travel cards will often give 2x point/miles for some purchases and up to 5x for travel purchases.
• Customers who sign up for a new travel card often use that card for all spending to reach the minimum to earn maximum miles sign-on bonus.
• Customers use travel credit to pay regular bills that are already within their budget so as not to carry the balance over from month to month on credit card.
• Research has found no specific time of year that spending with travel credit cards is higher or lower than traditional cards. General credit card spending was highest in quarter 3 of the fiscal year.
• It is suggested that consumers apply for travel credit cards when they first come out to take advantage of any perks of being a new cardholder.

REASONS FOR GETTING A TRAVEL CARD

• People who travel frequently for work or pleasure get travel cards to get maximum benefits while traveling.
•  Businesses and employees use them for all travel expenses, especially in situations where the company pays off the balance and employees reap the rewards.
• People who want to earn miles/points for flights, hotels, other travel benefits/perks.
•  No specific time of year was mentioned as to when people get travel credit cards, though decisions are often linked to specific airlines or brand loyalty.

RESEARCH STRATEGY:

HELPFUL FINDINGS

• According to CardRatings, "men are more likely than women to have a rewards credit card (87 percent vs. 80 percent), but among them, men and women are almost equally likely to leave rewards on the table (5 percent vs. 6 percent)."
• The same survey reports that Americans aged 35 and older who have a personal credit card are more likely than 18- to 34-year-olds to have a rewards card (87 percent vs. 72 percent). Those ages 55 and older are more likely than their younger counterparts (ages 18-54) to believe they have an excellent credit score (68 percent vs. 40 percent).
• The same survey showed that 2% of rewards cardholders whose household income is $100,000 or more a year leave rewards unredeemed, while 11% of those whose households make less than $50,000 left rewards on the table. This indicates that the lower the income, the less likely people are to redeem rewards from their credit cards.
• Also, 12% of rewards cardholders with a high school education or lower leave rewards unclaimed, while only 3% of college graduates leave their rewards to languish.
• The same survey has also revealed that 36% of Millennials (ages 18-34) who have a rewards credit card redeem rewards as soon as they are available as compared to just 20% of adults ages 45+ who say they redeem right away. 19% of those between the ages of 55 and 64 redeem their rewards right away. 60% of the 55 to 64-year-olds prefer to let rewards accumulate and rollover.
• According to a NerdWallet study, more than one-third of Americans (35%) have a credit card that earns travel rewards, like points or miles, to put toward flight purchases.
• Also, younger Americans are usually less likely to be properly informed about card reward systems, while only 7% of Gen Zers and 16% of Millennials know the average value of a reward point, compared to 18% of Gen Xers (ages 39-54) and 23% of baby boomers (ages 55-73).
• In 2017, the most Chase Sapphire users had an annual income of more than $150,000 (24%), followed by those with incomes between $50,000 and $74,999.
• The least users had an income below $50,000.
• According to the same survey, 87% of Chase Sapphire cardholders were millennials in 2017, with only 3.6% of holders older than 44.

RESEARCH STRATEGY:

TRAVEL CREDIT CARD CONSUMER JOURNEY IN THE UNITED STATES

STAGE 1: AWARENESS

• According to a survey, around 61% of respondents do not possess a travel credit card, and 70% of them do not even consider applying for a card to support their vacation trips. On the other hand, of the respondents who have a travel credit card, 45% do not plan to pay for their forth-coming trip using it.

STAGE 2: CONSIDERATION

1. Motivation

• Apart from the 70% respondents who wouldn’t like to get a travel credit card, about 5.7% of Americans would consider getting a travel credit card if they couldn’t afford vacations and travel trips while 9% say the same if they would get rewards and/or bonuses.
• According to a survey, around 11% of Americans are “likely or very likely” to opt for a new travel credit card before a trip.

2. Options while considering travel credit cards

• Around 61% of Americans would prefer cash back credit cards, 12% selected gas credit cards, another 12% chose an airline credit card, about 12% would prefer general travel card, and 4% preferred a hotel credit card.

3. Reasons why people do not consider these cards

•  Thirty-five percent of Americans who do not prefer to apply for travel credit cards are worried about the risks involved in taking more debt. Around 10% say they feel that they would overspend to achieve more rewards.

4. Gender consideration

• In general, men are more likely to possess “a travel credit card and redeem the corresponding rewards” as compared to women.

STAGE 3: PURCHASE/DECISION

Factors affecting purchasing-decisions while getting a travel credit card

1. Everyday rewards

• Around 44% of respondents find rewards as one of the most important features during the decision-making process of getting a new travel credit card.
• The type of rewards that are most preferred includes cash-back on purchases (19%), a complimentary night stay at a hotel (18%), and free domestic flights (15%).
• Out of all the respondents who say that hotel upgrades are one of the most attractive rewards, 63% were women. Simultaneously, 65% of all respondents who find flight upgrades alluring were men.

2. Annual fee

• Nearly 43% of Americans consider annual fee as the second most important decision-making factor when applying for a travel credit card.
• About 72% of travel credit card cardholders have a minimum of one card which doesn’t charge an annual fee. Other 25% have a card with an annual fee of up to $75; another 15% of cardholders have an annual fee that ranges between $76 to $150; while 10% were paying $151 or more. This shows that people consider economical options when choosing a travel credit card.
• Further, around 71% of respondents in a survey do not prefer paying an annual fee at all.

3. Sign-up bonus

• Almost 8% of Americans say that the initial bonuses are one of the most import features they consider when applying for a travel credit card.
• Further, about 36% of American Millennial (aged 23-38) said that they find huge travel credit card sign-up bonuses as the most the alluring feature in cards.

4. Foreign fee

• About 5% of respondents consider foreign transaction fees of travel credit cards as one of the factors during their decision-making process.
• About 25% of travel credit cards do not have a foreign fee while people can save up to 9% on Visa and MasterCard credit cards.

Other benefits consumers would prefer, if not offered by the card provider

• Almost 54% of respondents would not bear their own travel insurance cost if their credit card didn't cover it for free.
• Around 20% of those surveyed would buy trip cancellation protection.
• Nearly 11% of respondents would bear “the auto rental or travel accident insurance” cost.
• And, 14% say “roadside assistance is worth the cost”.

STAGE 4: SERVICE/RETENTION

• Around 52% of travel credit card cardholders have redeemed their rewards and cash-backs in the last year, while 29% have bought gift cards with their achieved points (which becomes nearly the same as cash). However, around 22% of the respondents did not redeem any rewards at all during the year.
• The travel credit card benefits that consumers have used — none (53%), rental auto insurance (27%), trip cancellation or delay insurance (16%), travel accident insurance (15%), price protection (13%), and return protection (12%).
• The responses based on the difficulty in getting the above benefits provided by travel credit cards were "OK" (54%), "hard" (29%), and "easy" (17%).
• The respondents who use travel credit cards were able to earn rewards worth $351 to $1,750 in a year.
• Almost 75% of respondents would not prefer using travel credit cards for their travel trips or would pay the amount off within one month of incurring the costs. However, over 23% say “they'll take between one and 12 months to pay off their trip on a credit card”. And about 5% would most likely take over a year to pay off.
• About 13% have swapped their points/miles for merchandise products; merely 9% exchanged it for a night stay at a hotel; while just 8% used it for free flights.
• Consumers tend to over-estimate the worth of their reward points. Consumers may even swap cards once they realize the actual value of their rewards. The younger demographic is the most guilty of this. Baby boomers tend to be the savviest when it comes to the real worth of their travel credit card perks.
• “When asked how they would most likely use 50,000 points or miles from travel rewards credit card”, around 40% Americans say they would redeem those points to buy flights, while 15% would prefer using them for non-flight travel expenses. Further, only 13% would consider these points for something besides travel, and another 13% would save it for later.
• Meanwhile, the rewards which were redeemed the least include complimentary hotel upgrades (10.4 percent) and free international flights (9.4 percent).

RESEARCH STRATEGY