There is a marked increase in consumers choosing cash-back rewards for their credit and debit card usage, compared to traditionally favoured loyalty points, airline miles or rebate programmes, according to the recently published TNS Consumer Credit Card Programme Study.
Penetration of cash-back programmes among all the cardholders surveyed rose from 57% in 2007 to 61% in 2008, and is forecast to gradually increase until at least 2010.
The combination of age, income and net worth was found to be a key driver for rewards usage. Cash-back is the most popular type of rewards programme across all of the age and affluence segments surveyed, with the exception of the Younger Upper Mass segment, which is most likely to choose bonus points followed by cash-back rewards.
Interestingly, 65% of Older Upper Mass respondents have cash-back cards compared to only 58% of the Affluent respondents who, along with the Young Affluent, are instead more influenced by airline miles.
Rewards cards are influential in many of customers' essential decisions related to credit cards, from acquisition to primary card status. Most often, a rewards card is considered the primary card and is typically the 'top of wallet' card and is used more than its counterparts.
"Our study found that rewards programmes usually translate into higher spending and greater loyalty," said Joe Hagan, senior vice president of financial services for TNS. "Card issuers should therefore tailor their reward and redemption programmes by considering each segment's level of need."
The maturing credit card rewards market has prompted issuers to broaden their appeal by reassessing programme value and catering to more diverse card segments. According to Hagan, card issuers are now faced with increasing competition and commoditisation, and pressure is mounting for consumers to apply only for the most appropriate cards for their needs and to pay off their outstanding credit balances. Consequently, card issuers will need to offer even more significant benefits to drive customer acquisition, retention and loyalty.