J.D. Power: AmEx leads the pack in customer satisfaction
Cardholders like the hotel rewards, but use cash rewards more often
For the second year in a row, American Express topped the list of credit card issuers that delivered the greatest satisfaction to customers, according to the latest J.D. Power and Associates credit card satisfaction study.
The 2008 survey ranked the top 18 credit card issuers. Altogether they handle 92 percent of the U.S. credit card market. The study measures customer satisfaction based on five areas: interaction; billing and payment processes; fees and rates; reward programs; and benefits and services.
American Express received a satisfaction rating of 783 out of a possible 1,000 points, followed by Discover with 751 points. The average score for the industry was 724 (See chart). An Ohio-based regional credit card issuer -- National City -- received a 721 rating, ahead of larger issuers such as JPMorgan Chase (719) and Citi (710). Bank of America, the No. 1 U.S. credit card issuer in terms of numbers of account holders, received a 692 satisfaction rating.
Rewards and benefits
"American Express appeals to customers looking for benefits and reward programs, and these customers are generally willing to pay higher fees for the additional value the card provides. Conversely, Discover Card has found success with customers looking for simplicity, which it offers through no annual fees, cash rewards and fewer problems than other issuers," Rocky Clancy, executive director of financial services at J.D. Power, said in a press release.
AmEx issued a statement shortly after the study's release. "We are delighted today to know that our card members thinks we are on the right track," said Jud Linville, CEO and president of AmEx's Consumer Services division.
"We know that in challenging economic times, consumers have high expectations of credit card companies, and we're proud to have scored well in the areas that resonate most with consumers," said Margo Georgiadis, Discover Card's chief marketing officer, in a prepared statement.
According to the study, 72 percent of all credit cardholders participate in some type of rewards program. Cash rewards were the most common type of reward redeemed by users. Hotel stays were the most satisfying type of reward. Satisfaction with credit cards was 117 points higher for people who redeemed rewards points than for those who did not -- an indication that "customer satisfaction improves with use of rewards," according to Clancy. "Making the reward redemption process as easy as possible by removing limits -- such as point expiration dates or restrictions on use -- encourages use of reward programs, thus enhancing overall satisfaction."
The survey also found that people who pay their credit card bills off in full each month (called transactors) were more satisfied with their credit cards. More than three out of four of transactors (77 percent) select their credit cards based on rewards programs. On the other hand, people who carry balances from month to month (called revolvers) are more focused on interest rates and fees (65 percent).
|J.D. Power and Associates
2008 Credit Card Satisfaction Study
The rankings were based on responses from 7,665 credit card users who were surveyed in April and May 2008. This was about the time that members of Congress, federal regulators and the media were focusing a great deal of attention on the need for credit card industry reform.
In a telephone interview, Clancy says J.D. Power had expected the calls for reform to influence survey responses, but the final numbers showed little impact in the category most likely to register dissatisfaction: fees and rates.
"You're not seeing some whopping number that people are really ticked off with the fees in their credit cards," Clancy says.
Overall credit card satisfaction was 724 of a possible 1,000 versus a 656 satisfaction rating for fees and rates. Clancy compares that to the 737 overall rating and 614 rating for fees and rates in the retail banking industry. For the second year in a row, credit cards had the lowest satisfaction rating of any financial services industry sectors. Mortgage servicing was highest with 784, followed by home equity lending (780), full service investing (776) and retail banking (737).
Lack of awareness
Clancy says: "One of the things that we noted that really surprised us given the attention in the press and with regulators was the lack of awareness about the particulars" of credit card terms.
"Fifty-three percent of the people we talked to did not know their interest rate," he says. "Seventy-three percent did not know what the grace period was and 25 percent did not know what benefits their cards offer."
Regulation Z of the Truth in Lending Act requires credit card issuers to disclose key terms and conditions of credit card agreements in solicitations, at account opening and on monthly statements.
Card users who did not know their annual percentage rate (APR) were less likely to be satisfied with their credit cards, Clancy says. "The more engaged cardholders were with their cards, the higher level of satisfaction they had," he adds, calling those customers "happier campers."
His message to consumers: "It's a two-way street. Hey, if you want a better experience, educate yourself."
The satisfaction numbers tell a different story for credit card issuers, Clancy says. They must work harder to educate customers about special programs such as rewards and benefits (e-mail alerts, annual account summaries, bill payment services and fraud protection), which the survey shows strongly influences customer satisfaction.
"When you look at the marketing zeal that goes into getting a card in your hand in the first place, the efforts after the fact -- on rewards, rates their paying and the finer points around disclosure -- that zeal is missing. It becomes more of a perfunctory thing," he says. "Put as much zeal into that aspect. You've got to make sure that people know about it and educate them and make it easier."
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