US travel credit card market

Part
01
of three
Part
01

Changing Travel Credit Card Providers - United States Consumers

There are various instances when and reasons why a US consumer would use or change their travel credit card provider. Some reasons include a lower their interest rate, reduced or removed blackout dates for using benefits/miles/points, earning specific perks or benefits (lounge access or free check baggage), or to have no fees when using their card overseas. Spending patterns and purchase periods vary depending on the consumer and their goals when using the travel credit card.

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  • Dynamic Pricing: This refers to unpublished prices that change without notice making it harder to “rack up” air miles/points to put toward a specific trip.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:

We started this project by using various recommended websites from our early findings. We quickly found a number of reasons why consumers use and change their travel credit card providers. Many consumers often have two or more travel cards to reap even more benefits. Finding hard data or statistics on travel cards specifically was a bit trickier. The statistic that 35% of Americans have at least one travel card was the only clear statistic we could find. Most statistics give numbers on credit cards in general, as opposed to travel credit cards. Through our search, we were able to find that those who do have a travel credit cards use the card like a traditional credit card for everyday spending (gas, eating out, groceries, etc). This is to achieve the minimum spending amount on the card to earn miles, sign-on bonuses, or other rewards with the card. The more you spend with most travel credit cards, the more miles/points or travel perks you can earn.
Part
02
of three
Part
02

Demographics of Travel Credit Card Providers - United States Consumers

After an extensive search through industry-related websites, financial sites and databases, and company-specific demographic data, details about the demographics of US consumers that are travel credit card users do not appear to be available in the public domain. However, the research team was able to gather valuable insights about rewards credit cards and their user demographics, as well as demographic data on Chase Sapphire cardholders.

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:

We started the search by looking for data and studies with a focus on travel credit cardholder demographics. We have searched sites that are known to publish demographic information. Our search produced no relevant studies that have been conducted. Available data focused on irrelevant things like general credit card user demographics or the demographics of credit card users in the online shopping space, as well as demographic data on cash-back credit card users.

We have also searched for any polls or surveys that consult travel reward credit card users regarding their (1) age, (2) gender, (3) income levels, (4) education, and (5) marital status. What we hoped to accomplish was to find a percentage of travel card users that belong to certain demographics, which we could then use in conjunction with the total number of travel card users to calculate the percentage of users within each demographic. Even after extensive searching, we were unable to locate any surveys that consult travel credit card users focusing on demographic information. Available travel card user surveys focused on general statistics like the percent of the total population that owns travel cards. Demographic surveys focus on credit card users in general and there was no way to filter out data for travel reward credit card users only

Next, we decided to search credible financial and business sites looking to find reports that mention the demographics of travel credit cardholders to find information on users by the five demographics listed above. We searched for news publications that focus on business or consumer profiles to try to find this data. We have also searched sites that specialize in financial advice regarding credit cards. Through this method, we found some articles that focused on the demographic profiles of reward credit cardholders and focused on the aspect of the likelihood of reward redemption. Unfortunately, this was the closest we were able to get using this strategy. Other reports focused on the demographics of reward credit card users in general. These didn't directly aid our search because the reports focused on reward cards in general, which can include cash-back cards among others, rather than travel credit cards in particular.

As the next strategy, we decided to identify three to five of the most popular US travel credit cards and look for demographic data on users for each of the identified travel credit cards. The strategy was based on the assumption that these travel credit cards take up the majority of the market and that most travel credit cardholders use them, which indicates demographic data for the most popular travel credit card users could be used as a proxy for overall travel credit card user demographics. This strategy failed because our search produced no reliable sources that list the top travel credit cards by the number of holders, even when looked for individually by the company. We determined that none of the credit card companies published information regarding the total number of their travel credit cardholders. Because of this, we were unable to determine the most popular travel cards by the number of users to use their demographic data as a proxy

We then decided to search for demographic information for each of the travel credit cards found along the way to use demographic data for each company as a proxy for the demographics of US consumers that are travel credit cardholders. We searched for information on Chase Sapphire credit card users, American Express Gold users, Capital One Venture users, Bank of America Travel Rewards users, American Express Platinum users, as well as some airline credit cards like Southwest Airlines programs, Delta SkyMiles, and JetBlue Plus. Our search determined that demographic information for users is unavailable for all the credit cards except Chase Sapphire. However, in the case of Chase Sapphire, the information was outdated. Still, we included the demographic information we found for Chase Sapphire cardholders in the helpful findings above.

The unavailability of the requested data is likely because this demographic information is sensitive and credit card companies rarely make this type of information available to the public, which could be why there is lack of conducted studies on this topic.
Part
03
of three
Part
03

Consumer Journey - Travel Credit Cards

According to several surveys conducted in the United States, more than 70% of Americans do not prefer getting a travel credit card, while those who’d prefer to get one generally consider rewards, annual-fee, sign-up bonuses, and foreign fee as the key decision-making factors.

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

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

We commenced our research by finding the journey of US travel credit card consumers by scouring through credible news publishing websites such as Forbes, The Guardian, USA Today, First Post, The Balance, and Business Insider. However, we were not able to find any pre-compiled information specifically on the consumer journey and decision-making factors. These articles only covered information about the best travel credit cards, dos and don’ts, and reviews. We had to change our strategy to gather the information, data, and relevant statistics from various American survey reports focusing on travel credit cards such as CreditCards.com, NerdWallet, WalletHub, US News, and Bank Rate. We’ve compiled relevant facts and information from these websites to present the consumer journey and decision-making factors in the research above.

Sources
Sources

From Part 01
Quotes
  • "Bottom line: The perks change, and although keeping track can be difficult, it's a good idea to reevaluate periodically whether a card is still the best one for you."
Quotes
  • "Rewards cards of any kind have higher interest rates than traditional credit cards. If you don’t pay your balance off in full each month, don’t even consider getting a rewards card. That interest can wipe out the value of those rewards."
Quotes
  • "Credit cards are great to use when you are overseas because you get the best possible exchange rate from them but if you are paying a fee every time you use the card, then it doesn’t become as good. "
Quotes
  • "Plenty of credit card holders have figured out how to game the system: Some are signing up for credit cards specifically for the bonus points and then abandoning the card (which doesn’t hurt a credit score the way closing a card would)"
Quotes
  • "Everyday spending is an important piece of the travel rewards puzzle. While it doesn’t offer the “get rich quick” feeling of a shiny 100,000-point sign-up bonus, it can help you top off your balance to get that next award or diversify your points into a different program you wouldn’t otherwise use much."
Quotes
  • "Once you sign up for that new credit card with a required spend, start using that card for everything."
  • "Additionally, charge bills and expenses already in your budget, so you won’t have to worry about racking up interest charges by carrying a balance."
Quotes
  • "In its January 2019 Credit Card Market Monitor, the ABA found consumers used their credit cards more during 2018’s third quarter, year-over-year."
Quotes
  • "Travel rewards cards typically benefit people who travel often for work or recreation and can afford to charge the high amounts on the credit card required to earn significant points or miles."
Quotes
  • "If you’re faithful to a particular airline, hotel brand, or cruise line, to consider their co-branded credit card. Spending translates into points or miles with the company’s loyalty or frequent flyer program."
From Part 02
Quotes
  • "According to a recent NerdWallet survey, more than one-third of Americans (35%) have a credit card that earns travel rewards, like points or miles, to put toward flight purchases. "
  • "According to a second NerdWallet survey conducted by The Harris Poll [2], of the 71% of Americans planning to take a summer vacation this year, more than three-quarters (78%) plan to use a credit card to fund their getaway(s). "
  • "The average value of a point or mile is around 1 cent, but fewer than 1 in 5 Americans (18%) know that. Close to half (45%) believe that they’re worth more than 1 cent, with 18% thinking a point or mile is worth $1 or more. Around one-quarter of Americans (26%) are not at all sure about the average value of a point or mile, and an additional 11% say points and miles don’t have any dollar value at all — they’re just offered to encourage consumers to sign up for a credit card."
  • "Younger Americans are generally less likely to know the correct value of a point or mile: Only around 1 in 14 Gen Zers (7%, ages 18-22) know that the average value of a point is 1 cent, compared with 16% of millennials (ages 23-38), 18% of Gen Xers (ages 39-54) and 23% of baby boomers (ages 55-73). At the same time, though, younger generations are generally more confident on the subject: Just 17% of Gen Zers and 18% of millennials say they’re not at all sure about the value of a point or mile, compared with 26% of Gen Xers and 33% of baby boomers."
  • "Younger generations are more likely than their older counterparts to overestimate the value of a sign-up bonus"
  • "Among those who have booked flights or hotels for summer leisure travel, millennials (ages 23-38) are more likely than older generations to book flights or hotels within a month of travel (63%, compared to 53% of baby boomers, ages 55-73). About a quarter of these millennials (23% compared to 13% of boomers) say this is because they were waiting for last-minute travel deals from apps they use or websites they follow (23%, vs. 13% of boomers) or waiting for hotels or airlines to share limited-time deals (21%, vs. 13% of boomers)."
Quotes
  • "But most Americans aren't grabbing this money-saving opportunity. The U.S. News survey also showed that while almost 54% of Americans are planning their next vacation, only 45% plan to put the expenses on a credit card. Here are a few more interesting nuggets from the U.S. News survey: A little more than 61% do not even have a travel rewards credit card."
Quotes
  • "According to a 2016 Bankrate survey, only 33% of those ages 18-29 owned a credit card. Additionally, a 2018 NextAdvisor survey found that Millennials (ages 18-37) were more likely to express confusion about credit card rewards than older adults."
Quotes
  • "Survey respondents also shared what they see as the benefits and drawbacks of credit cards. Having a cushion for emergencies is the greatest benefit of having credit cards, according to 42% of respondents. They also use their cards to avoid the inconvenience of carrying cash (38%), to get rewards (36%) and to build their credit (34%)."
Quotes
  • "Believe it or not, 45 percent of consumers who own rewards credit cards say cash is still king for purchases under $10, according to a new CreditCards.com poll. Debit cards (30 percent) come in second, while credit cards (23 percent) take a distant third place as the payment method of choice for buying inexpensive items"
Quotes
  • "That’s likely because these companies know that Americans, especially millennials, like splashy credit card rewards. About a third of millennials (ages 23 to 38) say they find cards with 3% cash-back rewards most appealing, followed by 22% who would opt for cards with a $500 sign-up bonus. "
Quotes
  • "To start, the survey showed that among those who have a personal credit card, 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 as likely to leave rewards on the table (5 percent vs. 6 percent)."
  • "Looking at age groups, it may take a few years for people to jump on the rewards credit card bandwagon. According to the survey, Americans ages 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). This could have something to do with the credit score perceptions. 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)."
  • "When it comes to income levels, the survey showed that the lower the income, the less likely people are to redeem their rewards. While only 2 percent of rewards cardholders whose household income is $100,000 or more a year leave rewards unredeemed, 11 percent of those whose households make less than $50,000 leave rewards on the table."
  • "Lastly, when looking at education levels, disparity appeared again. Twelve percent of rewards cardholders with a high school education or lower leave rewards unclaimed, while only 3 percent of college graduates leave their rewards to languish."
  • "Comparing age groups, the survey reveals that 36 percent of millennials (ages 18-34) who have a rewards credit card redeem rewards as soon as they are available as compared to just 20 percent of adults ages 45+ who say they redeem right away. Drilling down even further, only 19 percent of those between the ages of 55 and 64 redeem their rewards right away. Most in that age group seem to prefer to let rewards accumulate and roll over, with 60 percent of those ages 55-64 with a rewards credit card saying they do this."