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Written by Cyndie Martini
on May 12, 2016

Every time a customer approaches the front of a check-out line, he or she faces a choice: what payment method to use to make the purchase. Inside his or her wallet might be cash as well as several different cards.

The goal of any credit union or bank is that the choice their customers make at the cash register is to use the card from that financial institution. It is important to financial institutions that their consumers use the credit and debit cards issued from that organization to make money. However, with a wallet full of potential payment options, institutions often need to give customers a little incentive to choose a particular card or another choice.

The rise of rewards
It is because of the need to incentivize card use that so many credit and debit cards are tied to loyalty rewards programs. According to NerdWallet, almost 80 percent of new card volume in the first quarter of 2014 wasconnected to rewards cards, and more than half of consumers chose a new card specifically for the rewards program.

Equifax spoke to a small panel of millennial professionals to learn about their view of credit cards. According to the report, each participant explained that rewards are one of the main reasons they have credit cards at all- without the programs, they would be wary of getting and using the cards for fear of debt and damaged credit scores.

"Our generation can be bought," one panelist stated.

Not just any rewards program will do, though. Equifax found that its panelists actively and thoroughly researched various rewards programs before making a decision. This means that, while it's better to offer a rewards program than not, it is crucial that the program be competitive with other financial institutions.

What cardholders want
First and foremost, the rewards program should be easy to understand and use. According to a study from Capital One, only one-fourth of consumers are happy with their current rewards programs,, an online credit card information source, reported.

Part of the dissatisfaction comes from limitations on their rewards, such as only being able to redeem cash back in increments of $25, or cash back rates that change throughout the year. Travel rewards points also caused some frustration, as 35 percent of survey respondents said they tried to book a trip using them, but found that their points or miles didn't cover as much as they thought they would.

Respondents reported they would prefer a rewards program that provides the following:

  • Allows them to earn points on any purchase category.
  • Didn't have limitations on how many points they can earn.
  • Excluded rewards requirements, such as sign-up points or spending thresholds.

According to Credit Union Magazine, there are four main categories that credit unions should focus on when offering rewards cards: ease of use, relevance to users' lifestyles, value and created with users' needs in mind.

It's also important that the program is on par with or more convenient than competitors' programs. Credit unions need to do their research on what else is available to their member base.

Additionally, knowing what consumers want in terms of rewards is important. There are a plethora of options, such as travel points, cash back, gift cards, merchandise and many others. Consumer preferences aren't static, though. While cash back used to be the way to go, more people are realizing the benefits of other rewards.

Some attractive ones are gift cards, green products, experiences and merchandise, such as those available through Member Access Pacific's Dream Points Loyalty Rewards Program.

Credit unions have a unique advantage over big banks in terms of offering relevant rewards to consumers, according to Andrew Gates, who was the director of strategic partnerships at RewardsNOW, now Augeo, a business that helps organizations and financial institutions implement rewards and other programs.

"They can take the hometown stance with local redemption and merchant programs," Gates told Credit Union Magazine. "The big banks just aren't fast or deft enough to do this. It's a great niche."


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