Are travel rewards cards still rewarding during COVID?
In addition to the disappointment of canceling a trip, COVID-19 has many questioning the long term effects on the travel industry. It’s an excellent time to examine reward-based credit cards, especially ones that offer travel rewards.
As someone with nearly 20 years in the payment card industry, I’ve seen the emergence and wide-spread adoption of rewards programs being integrated into credit card offerings. Differentiation is critical to card issuers seeking to attract new customers and, in addition to distinctive form factor choices like metal cards, rewards programs are one of the most highly successful marketing tools. While cash-back and “pay with points” rewards programs exist, travel rewards cards are among the most popular of these rewards programs. But with travel plans on hold for the near future, I’m often asked if these programs are still relevant. My answer is: absolutely!
Card issuers are doing everything they can during this time to invest in their cardholders, which includes offering additional rewards across spending categories, such as enhanced points for spending on things not typically eligible like gas and groceries.
Investing in Loyalty
Many people know about rewards programs, but few realize how costly these benefits are to the card issuers themselves. The purpose of rewards programs is to maintain customer loyalty, attract new potential customers and build the brand of the card itself. It is in no one’s best interest to lose the momentum and investment of building those out now during this pandemic. Card issuers are doing everything they can during this time to invest in their cardholders, which include offering additional rewards across spending categories, such as enhanced points for spending on things not typically eligible like gas and groceries. They are also addressing “annoyances” that cardholders may be feeling, such as extending expiration dates, maintaining loyalty levels and postponing annual fee increases.
Travel Rewards are Not Just for Travel Anymore
In the early days of credit cards, reward programs tended to stick with one type of reward and the marketing that accompanied the card itself would highlight that particular benefit. For instance, cash-back gave consumers the option to recoup some of their costs, retailer/vendor-specific rewards enhanced points when shopping at specific places, and travel reward offered benefits, such as upgraded seats when flying, premier lounge access, upgraded hotel amenities and even comped flights or hotel rooms. However, today’s financial institutions understand that the demand for more comprehensive rewards program to keep their card top of wallet for different spending categories.
The current pandemic has forced an even larger adoption due to the necessary change in consumers’ behavior and spending habits. Card issuers are reinvesting the economics they earn to create even more robust rewards programs and flip paradigms. For example, a card that offers 3x points for every dollar spent on dining and travel and 1x point for every dollar spent on supermarkets and specific food delivery providers offered a limited time 5x promotion for the latter two spend categories. We’re also seeing rewards categories broadening. Rewards points that could once only be redeemed by spending on travel are currently being allocated to groceries, dining and gas. Another limited time offering, clearly dictated by the population stuck at home, is a rewards program for statement credits for streaming and wireless services.
For the many people who are eagerly awaiting a return to normalcy and to resume their travel plans, issuers also are preparing their rewards programs. Many issuers are extending the life of the reward benefit redemptions and the time period allowed to earn them. For example, travel rewards or points that may have previously required users to redeem them within the calendar year, have been lengthened. Other issuers are allowing cardholders to maintain the status that corresponds to spend and/or partner usage, which typically resets every year.
Additionally, for the cards that have annual fees, some issuers are postponing an annual rate increase. There are also special programs that were launched to waive fees and interest charge for those requiring assistance during the pandemic but still offer opportunities for big savings and cash-back.
Card issuers continue to invest heavily to strengthen relationships with their customers and help them stay informed through emails, mailers or messages in their respective apps. Consumers are doing themselves a disservice if they don’t stay informed about the benefits of their rewards card. Issuers need to quickly identify and enhance the ways they communicate new benefits to their rewards programs. Be it through social media campaigns, customer success stories or advertising, a robust communications program will help keep customers engaged and enrolled.
The customer is still king in the eyes of card issuers. Though the current state of the world may have changed, the ways in which customers are retained remain the same. What do our customers need today that we are not giving them? Can we deliver a fresh set of rewards more relevant at this time? And perhaps most importantly, have we established a two-way communications channel to be as close to our customers as possible during this time.
A Little Research Goes a Long Way
I recommend anyone who is thinking about enrolling in a rewards program to do the homework (and the math) to determine whether the cost of the card exceeds the benefits they plan to use. In addition to your own homework, there are a number of resources online to determine the “best” card for rewards. An entire cottage industry of websites, like The Points Guy and NerdWallet – which both offer recommendations and may receive compensation for clicking through their links that originate from their websites – as well as mainstream media outlets, like CNBC and Business Insider, all regularly publish their takes on the top picks based on comparative analysis of the current offerings. If you are making purchases anyway, why wouldn’t you take advantage of a rewards program that matches your interests and lifestyle? Travel rewards have expanded and issuers offer more ways to reward its customers, so don’t overlook many of the other benefits of these cards beyond just their travel features.