Inflation Pushes Consumers to Seek Everyday Value From Credit Card Rewards

Rewards are among the key determinants in how consumers choose — and use — credit cards.

In the PYMNTS Intelligence report “The Role of Rewards Programs in Credit Card Usage,” 71% of consumers said they were satisfied with their card rewards programs, which leaves about 30% of consumers who see room for improvement when it comes to their rewards programs. The data show that roughly 31% of consumers find lengthy redemption procedures a significant issue, and 26% are frustrated by insufficient rewards for desired purchases.

For the card issuers themselves, there’s value in crafting rewards programs that will be used: Other PYMNTS Intelligence reports have found that 77% of consumers who do not live paycheck to paycheck chose their credit cards because of the benefits of rewards programs. Since they have relatively more financial firepower than their more financially pressured cohorts, it stands to reason that they’d spend more on their cards.

With the holiday shopping season in full swing, cards have been a key conduit to shopping, and use of revolving credit (which includes credit cards) has been ramping up.

The Consumer Financial Protection Bureau (CFPB) said Wednesday (Dec. 18) that card companies that devalue those rewards points or cancel them outright may be breaking consumer laws — and issued a “circular” to law enforcement agencies on the matter.

The Value of Rewards Programs

Separately, a May CFPB report on credit card rewards noted, “Consumers earned more than $40 billion in rewards on major issuers’ general purpose credit cards in 2022, increasing over 50 percent from 2019 levels. Much of the increase in credit card rewards costs is explained by greater consumer spending, as rewards expense is primarily a function of purchase volume. However, the average value of rewards earned has also grown from 1.4 cents per dollar spent in 2019 to 1.6 cents in 2022 as , as issuers reported increased rewards spending to incentivize applications and grow balances.”

For merchants and card issuers, a granular level of data on consumer shopping habits and preferences will help shape the next iterations of rewards programs and card-linked offers, helping avoid some of the points of friction noted in the PYMNTS Intelligence data. In an interview with PYMNTS published just ahead of Black Friday, Martin Qiu, associate professor at Lazaridis School of Business and Economics, Wilfrid Laurier University in Ontario, noted that data “can facilitate converting new shoppers who are attracted by seasonal shopping promotions into loyal customers through strategic customer experience management … by analyzing this rich dataset, retailers can identify promising customer segments and develop targeted loyalty programs tailored to their characteristics.” The same holds true for the card firms, we note.

And in addition, there has been some movement — with the help of FinTechs and platforms — toward making rewards fungible, portable and ubiquitous. In one example, Len Covello, chief technology officer of Engage People, told PYMNTS in an interview that merchants are going to need to fine-tune, and in some cases overhaul, their rewards offerings.

“Consumers have higher expectations of what they’re going to get, ultimately, from loyalty programs,” he said. Although points redemption remains a mainstay of commerce, in the current inflationary environment, consumers want to be able to use rewards to defray the costs of everyday spending, such as on groceries or gasoline, Covello said. “When they are tightening their budgets, consumers will use their points on everyday items … And they want merchants to ‘speak to them’” about their daily, real-life needs, he said. Separately, and in another example, at the end of last year, American Express said cash-back cardholders could now spend their Reward Dollars on Amazon.