NEW YORK—Is a credit card “rewards war” taking place?
It appears to be. The competition in credit cards rewards programs is only becoming more fierce, as more issuers pour money into their programs and sweeten the incentives.
CUToday.info had previously reported analysis by Tim Kolk, principal at TRK Advisors in Peterborough, N.H., that showed large issuers are escalating reward value to win new accounts.
“This is on both new account bonuses and ongoing reward value,” he said. “They do this instead of offering lower rates because the consumer market has demonstrated, over and over, that it cares more about rewards than rate. Only a few credit unions have kept up, and it is a key moment for them to decide if they are up for this challenge or not.”
Now a new report from Bloomberg is reinforcing that analysis, with the news service reporting that a “rewards war” among the major issuers is underway.
“Issuers have sweetened rewards, cut fees and sought to improve services to lure customers, making it tougher to grow profits. In the past week, three of the biggest lenders—Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp.—said combined income from card operations dropped 15% to $3.1 billion in the third quarter from a year earlier. At the same time, expenses in their consumer-bank units rose 1% to $15.3 billion,” Bloomberg said.
As Kolk stated in the CUToday.info report, CUs now face an “inflection point” with the card programs, having to decide if they are going to beef up their rewards programs—meaning spending more on offers and making a smaller profit—or fall behind banks in this market space.
Bank of America recently stated that it issued 1.3 million new consumer credit cards during the third quarter, the most since 2008. The lender has stood by its rewards program because it helps drive deposit growth, Bloomberg noted.Top of Form
JPMorgan Chase saw a 35% jump in new card accounts, which was driven in part by its Sapphire Reserve Visa, Bloomberg reported. The card, which debuted in September, features a 100,000-point sign-up bonus, triple points on travel and dining, airport lounge memberships, and credits that help offset its $450 annual fee.
As CUToday.info reported, Chase got so many applications that it ran out of metal alloy used to make the cards.