A forced change for travel card rewards systems
While the impact of the coronavirus pandemic has been severe to many sectors, the travel industry has suffered substantially, with air travel at less than 50% of what it was in 2019 (Source: Forbes). Adjacent to this drastic shift, credit card issuers have had to adjust the reward earnings on their travel cards with refined or added opportunities. Over the course of the past year, customers have directed their spend on grocery, online retail, tech and streaming services. Credit card issuers looking to increase customer retention and affinity have adapted their offerings.
Travel cards are defined by their high rewards earnings towards travel purchases or associated benefits, such as travel insurance, airport lounge access, or lost luggage reimbursement . Issuers need to find the balance between temporarily adjusting rewards earnings and ensuring travel cards maintain their integrity for when travel becomes more viable again. Firms faced the challenge of shifting the reward earnings during the pandemic, blurring the lines between travel and cashback cards and offering a well-rounded experience.
In reviewing the digital card developments of 25 providers across the U.S., FBX analysts observed noteworthy developments across rewards platforms. Issuers have been quickly improving digital offerings to address changing consumer behavior, as evidenced by our latest Q1 Credit Cards Servicing Report, part of our Digital Banking Hub.
American Express offers dining as a top spend category
While the American Express Gold card could be classified as a travel credit, it incorporates rewards that reflect current consumer spending behavior. The two highest earning categories is four points for every dollar spent on dining – with the emphasis of including takeout and delivery – and groceries. Travel, or specifically booking flights, is only the second highest earning category. The card details page displays a featured benefit for Uber Cash for both dining or rides – in light of the quarantine and closures of indoor dining, Uber’s delivery business has grown substantially.
American Express’ Gold Card offers fewer points for booking flights than spending on dining or groceries – image obtained from the Digital Banking Hub
Chase provides statement credits towards grocery store purchases
The Chase Sapphire Preferred card currently highlights both travel and grocery reward spending within the initial bonus offer. The firm informs customers that their 60,000 bonus points – earned after spending $4,000 in the first three months – is worth $750 towards travel on the Chase Ultimate Rewards microsite. Users can also earn up to $50 in statement credits towards grocery store purchases within the first year of the account opening. Chase also emphasizes its focus on dining (including takeout and delivery) and travel by enabling customers to earn two points per dollar spent.
Chase’s Sapphire Preferred Card provides noteworthy dining and grocery store reward earnings – image obtained from the Digital Banking Hub
Wells Fargo provides a well-rounded rewards structure
Wells Fargo’s Propel American Express card has a robust reward earning structure. The travel card enables customers to earn three points for every dollar on many categories: dining (including takeout and delivery), gas stations, rideshares, transit, travel, and streaming services. Considering the card carries no annual fee, it maintains a valuable reward offering.
Wells Fargo’s Propel American Express Card enables customers to earn high rewards points in many categories – image obtained from the Digital Banking Hub
Travel cards continue to be worthwhile
When it comes to redeeming points, credit card issuers are also ensuring that their customers can find value with non-travel redemption options. While redeeming towards travel still provide the best value, options such as gift cards and cashback are being offered by most national providers and are available and viable for immediate redemption. It is important, however, to note that credit card rewards points often do not expire. When travel starts to pick up again, those points will still be available for many cardholders to redeem.
Despite the standstill that the travel industry has had to endure for the majority of 2020, the expected recovery aided by vaccine administration, as well as valuable card benefits and rewards still make travel cards worthy of retention. With travel resurgence on the horizon, competitive bonus offers will be available for consumers. Cardholders can take advantage of the current market by retaining their cards or even look to open new, competitive travel cards.