American Express currently ranks highest in terms of overall customer satisfaction among credit card issuers for the second consecutive year, according to the J.D. Power and Associates '2008 Credit Card Satisfaction Study', which observed that reward redemptions tend to enhance customer's satisfaction.
Now in its second year, the study measured customer satisfaction with credit cards by examining five key factors (interaction, billing and payment process, fees and rates, reward programmes, and benefits and services).
Top card issuers
American Express ranked highest among credit card issuers with a score of 783 on a 1,000-point scale. American Express performed well in all five factors driving customer satisfaction. Discover Card followed American Express in the rankings with a score of 751, performing particularly well in terms of interaction, billing and payment processes, and reward programmes.
"American Express and Discover Card are very different in their fees, reward programmes and incentives, and their strong performances indicate their ability to suit the various needs that dissimilar types of cardholders have," said Rocky Clancy, executive director of financial services for J.D. Power and Associates. "American Express appeals to customers looking for benefits and reward programmes, 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."
The study found that customers who primarily use their card as a payment device and typically pay their entire card balance each month-often select their card based on reward programmes (77%).
Conversely, credit revolvers (those who carry a balance from month to month) tend to focus on low interest rates and fees, with 65% selecting their card for this reason.
Interestingly, non-revolvers tend to be more satisfied overall with their credit card and are twice as likely as revolvers to remain with their primary credit card issuer.
Role of the reward programme
While reward programmes are more important to transactors than revolvers, 72% of all cardholders participate in some type of reward programme. Cash rewards are the most common type of reward redeemed and the second-most satisfying type of reward. Hotel stays are the most satisfying type of reward.
Additionally, reward programmes have a positive impact on cardholder satisfaction, largely driven by how often cardholders use the rewards they've earned. Satisfaction among customers who redeem rewards is 117 points higher, on average, compared with customers who do not redeem rewards.
"Customer satisfaction improves with use of rewards, so it is critical for credit card issuers to ensure that cardholders are taking advantage of these programmes," concluded 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 programmes, thus enhancing overall satisfaction."