By Phil Seely Senior Director of Portfolio Development
Originally published on CUInsight
Like bacon and eggs or mac and cheese, credit cards and rewards have become an inseparable pairing in people’s minds. According to a survey by The Ascent, a good rewards program is one of the top three card benefits wanted most by consumers. A key ingredient to a healthy portfolio, the right credit card rewards program can bring greater member satisfaction and a higher ROI for credit unions.
A well-strategized rewards program increases cardholder satisfaction by adding to the value of the card in their eyes. This higher satisfaction among your own members can bring about increased revenue for your credit union. To get the desired reward offered by your credit union-issued card, members are motivated to both sign up and use your card more frequently. This helps power your branded card to the top of member wallets for more frequent use. A 2021 ACI Speedpay Pulse Study showed that 60% of those who make one-time payments with a credit card were motivated by rewards earned for spending (Bankrate).
Younger cardholders like Millennials have never known a time when rewards programs didn’t exist, so they simply expect a credit card to come with rewards. Perhaps that’s why Millennials, more than any other generation, rate “a good rewards program” as the top benefit they want from a credit card (The Ascent). Thus, rewards are vital to the continued relevancy of your credit program. If you want Millennials to take the time to add your card to their mobile wallets, they need the right motivation.
Choosing the Right Type of Rewards for Your Members
Of course, offering the right type of rewards to your members is also important to a strong, healthy portfolio. Across all generations, cash back is still the most popular card reward benefit, but this has seen a decline in the last couple of years (The Ascent). Trends in rewards overall have been in flux, meaning the key to success is flexible reward redemption and knowing what is most important to your own members.
Despite these member benefits, the added cost of a rewards program has made some credit unions wary of adding a rewards program. Traditionally, however, the major card brands (Visa, MasterCard etc..) have offered tiered based interchange rates that provide a higher rate per transaction for cards designated as rewards cards to both make up the cost and bring higher earnings per active card.
Overall, rewards, like ingredients, can be combined with other quality card benefits or promotions to create a member-satisfying solution. Every palate is different so your credit union team needs to blend its understanding of member needs and preferences with a sound rewards strategy.
At Envisant, we’re here to help you develop that strategy and do the heavy lifting behind setting up a robust rewards program. To learn more about how we can help you strengthen your portfolio, contact the Envisant sales department at 1-800-942-7124.