People just can’t resist a good rewards program
- A study by J.D. Power found that 86% of credit card users choose their card based on the rewards it offers.
- According to a report by the Consumer Financial Protection Bureau, rewards credit cards make up approximately two-thirds of all credit card accounts in the United States.
In today's highly competitive market, startups and established companies alike are constantly searching for new and innovative ways to attract and acquire new customers. One of the most effective ways to do this is through the use of rewards programs. Rewards programs offer customers a variety of incentives for using their credit cards, making them an attractive option for people that are going to spend anyway.
One of the main advantages of rewards programs is that they provide customers with tangible benefits. Customers are able to earn points, miles, or cash back for their purchases, which can be redeemed for a variety of products or services. This makes the card more appealing, as customers feel like they are getting something in return for using it.
Another key advantage of rewards programs is that they provide companies with a way to differentiate themselves from their competitors. With so many different card options available, it can be difficult for companies to stand out and capture the attention of potential customers. However, by offering a comprehensive rewards program, companies can differentiate themselves from the competition and offer something truly unique. Additionally, by providing customers with the ability to earn rewards for their purchases, companies can create a strong sense of loyalty among their customers. This is because customers are more likely to use a card that provides them with benefits, as opposed to a card that does not offer any rewards.
More rewards mean more spending
- A study by Capital One found that customers who participate in rewards programs tend to spend 12% to 18% more on their credit cards compared to those who do not participate in such programs.
- The same study by Capital One also found that customers who participate in rewards programs are more likely to pay their balances in full each month, indicating that rewards programs can have a positive impact on financial management.
According to the data, rewards programs also have the potential to drive customer engagement and increase usage of the credit card. When customers are able to earn rewards for their purchases, they are more likely to use the card for all of their transactions. This increased usage can help credit card companies increase their profits, as they collect more interchange revenue from their customer’s expenditure
Trust & Credibility
Finally, rewards programs can also help credit card companies to build trust and credibility with their customers. By offering a comprehensive rewards program, companies with card programs demonstrate that they value their customers and are committed to providing them with the best possible experience and are invested in their success and well-being. This can help to foster a strong sense of trust and confidence in the company, which can be crucial for building long-term customer relationships.
But How Do You Pay For It?
Some companies see rewards programs as just another cost center, but that’s far from the truth, at least for companies that recognize that debit is dead.
The majority of debit card programs don’t offer any sort of rewards because they simply can’t afford it. Rewards programs are typically funded through the fees and interest charges associated with a credit card. This includes interchange rates, annual fees, balance transfer fees, cash advance fees, and interest charges on unpaid balances. Unfortunately, debit cards don’t attract those same fees and they don’t charge interest.
So does that mean only credit card companies can benefit from a rewards program? Absolutely not! Whether you’re switching from a debit card or launching a new secured card, Bond’s credit builder card allows companies to receive the same interchange revenue as traditional credit cards.
When customers use their credit cards or their secured credit card the company offering the card earns revenue from the merchants who accept the card as payment. Some of this revenue is then allocated to funding the rewards program.
It is also worth noting that you can partner with merchants to offer co-branded rewards programs. In these programs, you and the merchant split the cost of the rewards, with the merchant contributing a portion of the funding in exchange for increased exposure and customer loyalty.
The statistics provided along with the discussion highlight the importance of rewards programs for any company with a card program as well as their popularity among customers. By offering comprehensive rewards programs, companies can attract new customers, differentiate themselves, build trust, increase usage of their cards, and ultimately, drive growth and profitability.