NEW YORK--Credit union leaders increasingly believe their rewards programs outperform the competition. However, their members are telling a dramatically different story.
While 45% of credit union executives say their institution offers better rewards than its largest competitor, just 14% of members consider rewards an advantage of banking with their credit union, according to a new PYMNTS Intelligence report produced in collaboration with Velera.
That perception gap represents more than a marketing problem. Rewards are the leading factor consumers consider when deciding which card to pull from their wallets, and the card selected most often captures the spending, interchange income and daily engagement that can turn a secondary financial relationship into a primary one.
Yet credit unions convert only 48% of their cardholders into top-of-wallet users, compared with 69% for national banks, PYMNTS Intelligence found. Just 14% of credit union members used a loyalty or rewards program at their primary institution during the past year, versus 25% of national bank customers—a 71% difference in usage.
The findings are based on surveys conducted from March through May 2026 involving more than 18,000 respondents. That included 14,218 consumers, 3,529 small to mid-sized businesses, 500 credit union executives and 100 FinTech executives. The research examined card behavior, institution preferences, innovation priorities and plans for rewards programs.
Credit union members are hardly indifferent to rewards. Among consumers with multiple cards, 44% of members said rewards influence which card they use, slightly higher than the shares reported by national bank, regional bank and local bank customers. Among members who used multiple cards, 60% said they selected cards for particular purchases to maximize rewards or perks—the highest percentage among any financial-institution customer group studied.
Across all consumers owning multiple cards, 40% identified incentives such as cash back as a card-selection factor, ahead of lower interest rates or fees at 30%, credit limits at 22% and data security at 21%. Among consumers using different cards for different purchases, 53% said maximizing rewards or perks was a reason, compared with 37% who were attempting to remain within credit limits.
The same priorities extend to business accounts. Thirty-six percent of small and mid-sized businesses identified rewards as a card choice factor, second only to lower rates or fees at 40%. Among multi-card businesses whose primary institution is a credit union, 25% said maximizing rewards was their most important reason for choosing a particular card, compared with 15% of businesses primarily using regional banks and 16% using digital-first banks.
Rewards also could give credit unions a way to attract consumers who currently bank elsewhere. PYMNTS Intelligence reported 32% of consumers whose primary institution is not a credit union said better rewards or cash back would make them prefer one. That trailed only lower rates or fees, cited by 34%, and ranked ahead of branch availability, digital-banking quality and customer service.
CUs See The Opportunity
The opportunity may be even greater among members who maintain their primary accounts elsewhere. Thirty-nine percent of those members said better rewards could persuade them to make a credit union their primary institution. Rewards were also particularly influential among Generation Z consumers, at 37%, and millennials, at 36%.
Credit unions appear to recognize the opportunity. Forty-seven percent currently offer a loyalty or rewards program, and another 31% plan to introduce one within three years. If those plans materialize, 78% of credit unions will offer rewards by 2029, compared with a projected 71% of fintechs.
Asset size remains a significant dividing line. Sixty-nine percent of credit unions with $1 billion to $5 billion in assets already offer rewards, as do 56% of those holding more than $5 billion. Only 31% of credit unions below $500 million currently have a program, although another 43% of that group plans to launch one within three years.
Many institutions expect to need help getting there. Among credit unions open to outside assistance, 52% anticipate using external partners for loyalty, rewards and other member-engagement programs. That increases to 58% among institutions below $500 million, compared with 38% of credit unions above $5 billion.
Member use could grow quickly as those programs become available. Fourteen percent of credit union members currently use a loyalty program, while another 15% expect to begin using one within three years, potentially doubling adoption by 2029.
The findings suggest credit unions’ greatest rewards challenge is not convincing members to care. Members already do. The challenge is developing programs compelling enough—and visible enough—to make the credit union’s card the one members choose when it is time to pay.