Sweetening the Offer

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Card holders are drawn to loyalty rewards and fraud protection

By Elizabeth Judd

Loyalty points, airline miles, cash and other rewards reel in credit-card customers like practically nothing else.

According to a J.D. Power and Associates “U.S. Credit Card Satisfaction Survey,” half of credit card holders selected a new card because of a better rewards program. Fifty-four percent of consumers consider their credit-card loyalty rewards as attractive, rating the benefits as a favorable 9 or 10 on a 1-to-10 scale—up from 46 percent in 2014, the financial product rating company says.

“Most consumers want to get a credit card they can benefit from, and that’s mostly rewards or a loyalty program,” says Liang Han, executive vice president for operations and card risk at ICBA Bancard, ICBA’s electronic payments services program for community banks.

As perhaps expected, J.D. Power finds that customers who give their rewards a favorable rating use their cards more often, on average spending $388 more a month on their cards than those who consider their rewards unattractive.

Informed card holders

However, Han points out that managing card rewards programs successfully is harder when consumers have more choices than ever before and competition is fierce.

Designing a rewards program that is simple and user-friendly is half the battle. Timely communication about the program and its enhancement is also important, he says, because “you want to engage and reward your customers.”

Helping consumers redeem their rewards matters, considering that those who do are likely to be more satisfied with the card and more likely to use their card for even more purchases. Customers who redeem rewards spend an average of $483 a month more than those who do not ($1,128 total per month versus $645), according to J.D. Power.

Given the growing importance of rewards to credit card holders, Han recommends conducting periodic assessments of such programs. “Community banks need to evaluate their rewards programs annually or biannually to make sure they’re still competitive to the large players,” he says. “You don’t want your program to be stale.”

Think retention

What’s more, general consumer confidence in card security is quite low. The J.D. Power study found that only about one-third of customers feel that their personal credit-card information is very secure. Financial product reviewer NerdWallet’s inaugural “Consumer Credit Card Report” predicts that as EMV security chip technology rolls out in the United States, online fraud may grow. What’s more, general consumer confidence in card security is quite low. For that reason, emphasizing fraud protection is generally a winner for card issuers.

Another potentially beneficial move is educating consumers about how to build strong credit histories through proper use of credit cards. The NerdWallet survey found that millennials have the lowest average credit scores (one-third have scores below 579).

Han advises community bankers to heed credit-card selection trends with the young demographic. NerdWallet found that about half of millennials who have ever applied for a credit card selected their most recent card because of an advertisement or promotion.

“A successful credit-card program can be over 25 percent of revenues for a community bank,” Han says. “Credit cards are a very profitable product, but of course, community banks need to manage these programs well.”


Elizabeth Judd is a freelance financial writer in Maryland.

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