Cardholders can’t get enough rewards and cash back, but many are not looking for new and better card offers, according to a new CreditCards.com survey.
The national telephone survey of 1,003 adults revealed 55 million cardholders rank rewards and cash back as the best benefits of the card they use the most. The popularity of rewards has encouraged many consumers to switch their preferred cards from time to time as 42 percent said they changed their favorite card within the past three years.
But there is still a large segment of the card-carrying population that rarely if ever strays from one trusted piece of plastic, despite the variety of reward programs now on offer. Thirty-eight percent said they had not changed their most-used card within the past 10 years or ever.
“People tend to select their primary card based on features that are important to them, from travel or cash back awards to low interest rates, but that doesn’t mean those features remain stagnant,” said Jeff Sigmund, spokesman for the American Bankers Association. “Competition drives innovation to increase the customer loyalty that’s so important to card issuers.”
Cash back, rewards are top favorite features
Here’s what the study found about consumers’ favorite credit cards:
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Rewards and cash back are tops. Forty percent of cardholders said rewards and cash back were their favorite benefits of the card they use the most. Nearly a quarter said rewards and cash back were the main reasons they signed up for their primary card. Only 21 percent said a low interest rate was the key benefit, and 18 percent said they signed up for their card because of a low APR.
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Older millennials are reward hounds. Sixty-two percent of cardholders aged 27-36 said rewards and cash back were the best things about their favorite card.
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Card loyalty comes with age. Baby boomers and members of the silent generation were more likely to have stuck with the same card for a long period than millennials and Generation Xers.
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Democrats are more likely to have gone card-shopping recently. Democrats and Independents were much more likely than Republicans to have changed their most-used card within the past 12 months. Other studies have suggested Republicans are more optimistic about their finances under President Trump than Democrats and independents.
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Our favorite cards give us peace of mind. Fifty-seven percent of cardholders said their favorite card offers purchase protection. Other common benefits include rental car insurance (38 percent), extended warranties on purchases (35 percent) and price protection (26 percent). But uncertainty abounds: Among cardholders, about 1 in 4 doesn’t know whether their cards offer these perks.
The scientific survey of 1,003 consumers, including 670 who have credit cards, was conducted Jan. 19-22 via landline and cellphone. See survey methodology.
Rewards are here to stay – for now
It’s no surprise that rewards and cash back are the toast of cardholders. Points and statement credits can deliver significant savings, especially if you avoid interest charges and your card has no annual fee. But that’s not the ideal situation for your issuer, which earns much of its revenue from fees and interest.
It raises the question of whether reward-generous issuers will soon follow the lead of Chase, which in January slashed the rewards sign-up bonus on its premium Sapphire Reserve card from 100,000 points to 50,000.
Adjustments notwithstanding, analysts expect issuers to continue offering attractive reward programs.
“I think we’ll continue to see travel and points rewards offered, but I don’t think we’ll see any acceleration from here,” said Christopher Donat, an equity research analyst at Sandler O’Neill & Partners. “Card issuers are picking their spots where they think [rewards] can have a useful impact on growing balances and attracting new accounts.”
While consumers cited rewards and cash back as crucial to their decision to acquire and keep a card, that’s not the case with sign-up bonuses. Only 2 percent said they signed up for their most-used card because of an upfront sign-up bonus.
Don’t overlook APRs, fees
The allure of rewards is strong, but experts caution consumers against signing up for a card solely for flashy perks. It’s true that some cards offer big bonus points, airline miles or statement credits in exchange for a modest spend in the first few months of membership. But outside of introductory offers and high-percentage cash-back programs, earning significant rewards takes work.
Brian Riley, director of the credit advisory service at Mercator Advisory Group, noted that for some cards you must spend as much as $10,000 to earn $100 in reward points.
“Rewards are great, but consumers really need to think about the whole package,” he said. “There are some great incentives on the market, but as a consumer you need to focus on the disclosures which talk to the introductory, purchase, cash advance and punitive APRs, plus all the associated fees.”
In our survey, 24 percent said they signed up for their most-used card because of rewards and cash back. These incentives outranked other important considerations such as a low interest rate (18 percent) and low fees (5 percent).
Riley recommends that consumers who tend to carry credit card balances month-to-month prioritize interest rates over rewards. Those who pay their balances in full each month might be able to risk signing up for a card with high rewards and an above-average APR.
“The dream of aspirational rewards is easier to think about than the rigors of carrying debt,” Riley said. “Many go in well intentioned, promising that they will pay in full each month. Then a child gets sick and there is a medical bill to pay, or a transmission fails and the cardholder needs to get to work. Balances start to build because there was no emergency fund in the bank.”
Key credit card features taken for granted
Credit cards typically carry a handful of valuable features that don’t grab headlines in the same way that rewards do. In our survey, purchase protection was the most common feature of cards that consumers swipe the most. It stands to reason that consumers feel secure in making most of their purchases with a card that insures them against damage, loss or theft of merchandise.
However, about one in four cardholders doesn’t know if his favorite card has these kinds of protections. It suggests many consumers are not taking advantage of key features such as rental car insurance, extended purchase warranties and price protection – which can refund you the difference if an item you just bought is listed at a lower price elsewhere.
Mercator’s Riley said rental car insurance can be critical because it’s costly and some top providers put renters on the hook for vehicle breakdowns that occur due to mechanical issues.
“You don’t think about [rental car insurance] on the way in, but if you buy it at the point of sale, that’s about 25 percent of the cost of the rental,” he said.
Many reasons to shop around
Reward and cash back programs are plentiful, but additional features could help you save more money and minimize stress. Some balance transfer cards allow you carry a balance for 18 months or more without paying any interest or an annual fee. The APR for such a card could be less than 12 percent when the promotional period ends, depending on the terms and your credit rating. And many cards ensure you against unfortunate accidents and that feeling you get when you learn an item you splurged for is on sale at a different store.
If you’ve been swiping the same card for a decade or more, there are numerous reasons to consider a change.
Survey methodology
CreditCards.com commissioned Princeton Survey Research Associates International to obtain telephone interviews with 1,003 adults living in the continental United States. Interviews were conducted by landline and cellphone in English and Spanish by Princeton Data Source from Jan. 19-22, 2017. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error is plus or minus 3.7 percentage points for the entire sample, and 4.6 percent for the subset of 670 cardholders.
See related: Redeeming rewards as a statement credit: Many cards allow it, What 2016 rewards card trends mean for you in 2017
