Poll: Rewards cards take larger share of market
By Fred O. Williams | Published: April 27, 2015
Rewards credit cards keep getting more popular, a new survey finds -- but some flavors of rewards are tastier than others.
Eighty-three percent of card users have at least one rewards
card, the American Bankers Association said Monday in announcing
results of a new poll. That's up from 77 percent in 2012, the last time the
survey was conducted.
"What we found is that an overwhelming majority of cardholders had consciously decided to have rewards programs associated with their card," said Molly Wilkinson, executive director of ABA's Card Policy Council. The pervasiveness of rewards means consumers increasingly expect a little something extra when they buy a product by swiping their card.
The first rewards that credit cards provided users with were airline miles, but the importance of that category is shrinking. These days, cash-back cards are king, with 55 percent of card users naming cash as their favorite reward, the ABA found. Points that can be redeemed for merchandise came in a distant second, with 23 percent naming them their a top reward choice, while a mere 13 percent of card users named airline miles as their preferred perk.
The poll, conducted in March with a sample of 1,006 respondents, buttresses other recent findings that rewards cards are extending their reach to a broader swath of consumers. Subprime consumers, those with credit scores below 660, make up a rising share of reward card applicants, a separate ABA poll found in 2014.
The bankers' lobby group said rewards cards are getting more popular in part because they are easy to understand. This may come as surprise if you've ever had airline miles devalued out from under you, or signed up for a lucrative bonus only to find out that collecting it would be harder than a calculus exam.
Of card users polled, 57 percent said their programs were "very easy to understand," while another 36 percent gave a less ringing endorsement, calling programs "somewhat easy to understand," the ABA said.
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Card rewards are one of the aspects of the market that the federal government's consumer watchdog is looking into. The U.S. Consumer Financial Protection Bureau said in March that it launched a review of the card market, and consumers' understanding of rewards is one of the areas that it will examine. The period to submit public comments to the agency ends May 18. The CFPB has logged 1,175 gripes about rewards since it started taking complaints about credit cards in December, 2011, according to its public complaint database.
In consumer satisfaction surveys, J.D. Power found that many consumers were unclear about how card rewards worked, even while their overall satisfaction with cards climbed. Fifty-nine percent said they fully understood their rewards program in 2013, but a third did not even know how to access their program.
"I think you have to look at people who say they partially understand their rewards, but then turn around and say they don't redeem their rewards or don't know what they can redeem their rewards for," said Jim Miller, senior director of banking services at J.D. Power.
The share of people who think they completely understand how to redeem rewards has been rising modestly, reaching 62 percent this year, he said.
Some cards, including Citi Double Cash and Capital One's Quicksilver, are making simplicity a selling point, he said, attracting people burned or confused by a rewards program.
"So much depends on the card type," Miller said. Cash-back cards have less complex programs to navigate, and some issuers have been working to reduce the hurdles to redeeming rewards.
Consumers still look for a low interest rate first when shopping for a card, the ABA said, citing its survey. A low APR was the primary motivation of 35 percent of respondents to apply for a card, followed by a valuable rewards program at 29 percent. Another 25 percent cited the lack of a specific fee, while 5 percent primarily looked for a high credit limit.
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