Cash rebates on credit card spending are perceived as the most valuable rewards type, followed by points-based and merchant rewards, according to research recently published by Auriemma Consulting Group.
In 2006, consumers were 11% more likely to hold rewards cards than they were in 2005. Benefit type continues to be the primary reason that consumers choose a particular rewards card for payment over others in their wallets. But once again, consumer perception does not match reality.
“Despite the fact that consumers consider cash rebates the king of rewards, cash-back cards experienced a 26% decline in market penetration in the past year and a half,” says Megan Bramlette, managing editor at ACG. “A year ago, the most frequently used rewards card was the cash-rebate card. Now airline cards take that title.” In 2005, 53% of rewards card users said that their card of choice was a cash-rebate card. That percentage fell to 39% in 2006. Airline cards grew in popularity from 41% to 48% over the same timeframe.
The attraction of rewards is slipping, however, with consumers paying more attention to interest rates than promotional currency. According to the research, 25% of respondents cited APR as the primary reason that they use a particular rewards card, up 14% from the 2005 survey.
“Rewards card holders seem to have shifted their perception of the value of their cards from high to moderate,” she says. “This shift may be because many card issuers have reduced rewards earning rates, giving cardholders a way to quantify their cards’ actual value.” Recently, some major issuers have eliminated or reduced cardholder bonus-point opportunities in certain categories or on certain products altogether.
The information in this release came from a survey of 508 credit card users in December 2006 and 500 credit card users in June 2005. The numbers were originally compared to the December 2006 survey.
ACG is a management consulting firm in the payments and lending industry and produces is a syndicated market research study from ACG that provides insight into how consumer perceptions impact credit card acquisition and usage.