Poll: Wealthy cardholders prefer cash-back rewards
By Tony Mecia
Even for the wealthiest Americans, the allure of exclusive airport lounges and pampering by concierges can't come close to the appeal of receiving cash back from credit card purchases.
Three out of every five people with investable assets of $100,000 or more said that cash-back was their favorite credit card reward, according to a new CreditCards.com poll of nearly 800 wealthy U.S. residents.
Cash was nearly three times more popular than the next highest reward, frequent flier miles (22 percent). Free hotel stays clocked in at 7 percent. Other perks often associated with lavish lifestyles -- concierge services, airport lounge access and special access to experiences -- barely registered, with 1 percent or less.
Stanley Ridgley, who teaches a course on wealth creation at Drexel University's LeBow College of Business, says the poll shows that the wealthy take money seriously and look to credit cards to help increase their wealth, not have frivolous experiences.
"One reason most wealthy people are wealthy is that they take care of their money," Ridgley says. "They recognize wealth is an instrument, and like any instrument, it must be used prudently and correctly, and this means manipulating income in ways that maximize its increase and utility."
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Confirmed: Wealthy like cash
Other surveys in recent years have consistently showed that receiving cash back on purchases is the most popular credit card reward for people of all income levels. Cash rewards, usually in the form of statement credits or checks, are the most flexible and easy to understand of all credit card rewards. There are two main kinds: those with constant cash-back rates, usually between 1 percent and 2 percent on all purchases; and those with differing rates depending on the type of purchase.
The second most popular reward, frequent flier miles, can occasionally be more lucrative than cash. However, airline miles can be subject to complicated rules and can be difficult to redeem.
The CreditCards.com poll also showed that, among those with :
- Frequent flier miles grow in popularity as wealth increases. People with household incomes of $100,000 or more were twice as likely to say frequent flier miles were their favorite than people with $75,000 or less. People with $500,000 or more in investable assets were twice as likely to choose miles as their favorite reward, compared with those with $100,000 to $250,000. Still, cash was the overwhelming favorite in all income and asset categories.
- Women are more likely to favor cash back than men, 67 percent to 56 percent.
- Older people are more likely to favor miles than the younger generation. Twenty-four percent of people aged 60 or over favored miles, compared with just 14 percent of those aged 18 to 44.
- People who are young and wealthy tend to prefer paying with their phones. Just 14 percent of people ages 60 and over said they would always or mostly prefer to use their phones for purchases, compared with 52 percent of those aged 18 to 44. People with higher household incomes were also slightly more likely to favor phone payments than those with lower incomes.
Cards courting the wealthy
Wealthy customers have long been a highly sought demographic by card companies because they tend to pay bills reliably and have high levels of spending, which translates to more money for banks through the fees paid by merchants.
To attract these customers, card issuers have added perks to cards, such as offering concert tickets available to cardholders before the general public, access to airport lounges, hotel upgrades, free credit scores and concierge services. While those can be important features of cards, the poll results suggest that the wealthy still believe cash is king.
Some card issuers that offer cash-back cards count the wealthy as a key demographic. Fidelity, for instance, says it considers about half of the customers of its 2 percent cash-back Fidelity Investment Rewards American Express card to be "highly affluent." The average cardholder earned an average of nearly $1,500 cash back in 2014, which equates to an average spending on the card of $75,000 per year.
Sam McLimans, Fidelity's senior vice president of cash management, says customers value having flexibility and control. He added that wealthier individuals tend to embrace new technologies, such as electronic bill pay and debit cards -- which could explain the interest in mobile banking and digital wallets.
"That prime segment of the wealthy, the adoption rate is very fast," he says.
The online poll of 793 U.S. residents with $100,000 or more of investable assets was conducted Jan. 15-21 by ORC International on behalf of CreditCards.com. Because the sample is based on those who initially self-selected for participation, no estimates of sampling error can be calculated.See related: Survey reveals travelers' favorite reward perks, 7 ways to get the most out of your credit cards