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Rewards Programs

Reward credit cards provide greater flexibility

Summary

Credit card companies are increasing the flexibility of their reward credit card programs due to heated competition for customers.

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Amid intense competition, credit card companies are increasing the flexibility offered by their reward credit card programs while also getting merchants to help foot the bill to fund the cards’ expensive perks.

Compare Reward Credit CardsCredit card issuers are adjusting their reward programs more often than before, creating new types of benefits and offering promotions for the most common types of purchases, such as buying gasoline. American Express and Citi are cutting back on some rewards that were linked to a wide variety of small purchases, instead rewarding cardholders who pay with their plastic at different types of merchants, including cable companies and specific apparel retailers.

In the latest move showcasing a push toward greater flexibility, Chase will offer the new Chase Freedom credit card that lets consumers shift back and forth between rewards in the form of cash or points without losing either as they make the switch.  The new Chase credit card will supply rewards on all purchases, with a sizable triple reward of 3 percent cash back or triple points for eligible transactions at grocery stores, gas stations and fast food restaurants, including merchants like Dunkin’ Donuts and 7-Eleven. Additionally, the Chase Freedom credit card has no annual fee and provides a number of other benefits when used to make small purchases.

Chase explained that its Freedom credit card was created in response to customers requests for greater control and flexibility when using their reward credit cards.

Meanwhile, other credit cards are now offering “experience” rewards.  For example, American Express cardholders may redeem 20,500 points for tickets to a Barbra Streisand concert in Florida in October 2006.

In other developments, issuers are granting customers the ability to earn rewards more quickly.  American Express notes that some consumers prefer “treats” like redeeming 3,000 points for the download of 25 songs on iTunes, versus saving up thousands of points for a large reward.  In August 2006, AmEx overhauled its successful membership rewards program, eliminating its double rewards points for “everyday spending” and establishing a program to promote shopping at particular retailers.

With increasing frequency, credit card companies are more deeply probing cardholders’ spending patterns to determine which rewards will be most successful.  Visa constructed a program in 2005 that pulls data from 65 million cardholder accounts and uses it to customize offers, allowing the company to create unique events that encourage shopping at certain merchants.

Merchants are therefore taking a more active role in credit card reward programs, and increasingly are helping to fund these same programs.  While credit card issuers and merchants are hesitant to discuss the economics of such programs, market research firm Martiz Inc. reports that it is a popular trend for the way it encourages cardholder spending while controlling costs for the card issuer.

Consumers should expect further changes to reward card programs.  Mastercard’s consulting arm, Mastercard Advisors, explains that declines the use of a reward credit card can be expected if a program is allowed to age without the regular addition of offers or improvements.  Mastercard adds that while just 10 years ago, credit card issuers did not even have rewards departments, now there are departments that do nothing else.

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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.

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Credit Card Rate Report Updated: April 8th, 2020
Business
14.03%
Airline
15.50%
Cash Back
16.22%
Reward
15.93%
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15.87%

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