BACK

Rewards Programs

Reward credit cards grow in popularity

Summary

The increasing popularity of credit card rewards among consumers has created a competitive market for card companies.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Reward credit cards are increasing in popularity, not just with the consumers who use them, but also with the credit card companies that market them.

Compare Reward Credit Cards

From the credit card industry’s standpoint, reward credit cards are a successful way to attract new cardholders in a nation where everyone already seems to have several credit cards. In 2005, a record high 6.06 billion offers were mailed out by credit card companies, but only a record low 18 million offers, or about 0.3 percent, were accepted. Realizing that they need better incentives to attract cardholders, credit card companies are improving more of their offers with the promise of rebates or rewards.

The idea of a reward credit card began in the mid-1980s when Discover made the offer of cash back on every purchase. That was followed by American Airlines joining forces with Visa to offer a frequent-flier mile for every dollar a cardholder spent. Credit card issuers have been creating variations on the rewards concept ever since. A typical reward credit card today offers about a penny back for every dollar spent, in the form of cash, goods, or services, with the goal of increasing both spending and loyalty.

Due to the success of rewards credit cards, competition has increased. In 2001, less than a quarter of credit card offers included the promise of a rewards program. But by 2005, the share was 58 percent, according to Mail Monitor, a unit of consumer research company Synovate. And at any given moment, some credit card company is usually offering rewards valued at several pennies on the dollar.

Rewards are not the only way the industry has attempted to drive spending and loyalty. Other techniques have included ranking credit cards with the names of precious metals, with a platinum or gold credit card suggesting that the company’s customers were elite or special. But as it became apparent that many people (some less special) were also getting gold cards, the concept lost a bit of its appeal. However, Americans continue to show interest in precious metal credit cards, so the trend may continue well into the future.

The aggressive marketing continues for so-called “affinity cards,” which feature the image of something a consumer loves such as a sports team, a university, or even a picture of the family pet. These affinity credit cards are popular with consumers, but are even more popular when they are linked with rewards programs. Studies indicate that people care more about a credit card’s rewards than about the interest rate, the credit limit, or any other feature, with Synovate noting that rewards are the single most important selling point for a credit card.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Rewards Programs

Reward credit card providers allow you to double dip this tax season

Reward credit card providers provide double rewards for cardholders who pay 2005 federal income tax with a credit card.

Published: April 28, 2006

See more stories
Credit Card Rate Report Updated: December 11th, 2019
Business
15.09%
Airline
16.88%
Cash Back
17.38%
Reward
17.04%
Student
18.58%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.