NEW YORK—According to one new analysis, new credit cards are “reimagining the role” rewards programs play in consumers’ lives beyond the traditional cash-back and travel categories.
“These cards can help incentivize certain behaviors, and may offer rewards on spending that isn’t covered in the typical grocery-restaurant-travel triad, like rent payments or home fitness equipment,” Nerd Wallet stated.
While the cards might not be as rewarding as a premium card with a massive sign-up bonus, they offer a greater degree of personalization, Nerd Wallet added.
“While these startups lack the brand recognition and deep pockets of big banks, they have one thing in their favor: speed,” according to Nerd Wallet. “Some financial startups rely on the services of other tech companies that provide the infrastructure (including selecting the bank partner and payment network, and establishing underwriting guidelines) for launching a new credit card. That makes it easier to turn an idea into reality.”
Added Ben Reid of M1 Finance, a personal finance startup with its own credit card that targets investors, “You’ll see that more of these interest-based cards come out because issuing a card is no longer as big of a lift.”
A Crowded Market
But how well the flood of new cards performs is another story, as they all face a crowded credit card marketplace with lots of competition, Nerd Wallet reminded.
“The challenge that, frankly, we’ve experienced is it’s really hard to break through, and it depends on your demographic,” Matthew Goldman, chief product officer at Apto Payments, a payments infrastructure company, told Nerd Wallet.
Goldman’s startup created the Grand Reserve World Mastercard, a card designed for wine lovers. He said he found that people who are willing to spend hundreds on rare wines tend to have high incomes and credit scores, which would make them eligible for a wide array of premium cards.
“No matter what, however, these kinds of cards will shake things up.” Nerd Wallet said.