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Written by Cyndie Martini
on March 15, 2017

Consumers have a wide and seemingly endless range of possibilities of credit cards, each one competing for their business. To bring in new members, or convert existing members to your union's credit card, it's crucial that you offer programs that will create excitement and interest.

One of the biggest allures of a credit card is its rewards programs. They come in all shapes and sizes: cash back, loyalty points, travel rewards and much more. When choosing what to offer your members, you'll need to keep in mind a few essential factors:

  • Will members want the reward?
  • Will the program benefit your credit union?
  • Will it encourage member loyalty?

The ideal program accomplishes all three.

Cash back vs. airline miles

The two most popular rewards types are airline miles and cash back. 

A recent survey from showed that 60 percent of wealthy Americans prefer cash back rewards to any others. Airline miles came in second, though just 22 percent indicated they would choose them over cash. The source noted that these results were consistent with results from related surveys that included participants across all income levels.

Airline miles, while favored by many, have their fair share of drawbacks. The redemption process is often difficult to understand and time-consuming. Ultimately, many people don't end up taking advantage of the rewards. According to a survey from the American Institute of CPAs:

  • 7 percent of Americans used travel rewards to pay for part of their last vacation.
  • 1 percent used travel rewards to pay for all of their last trip.

Additionally, while 15 percent of Americans said that they have, at least once, paid for a vacation entirely with rewards points, 14 percent said they've taken a trip only to rack up a credit card bill they weren't able to pay off by the time their bill was due.

"When chasing after elite status with hotels and airlines, it's important to not lose sight of the fact that miles and points often have a dollar value associated with them," Gregory Anton, the chair of the AICPA's National CPA Financial Literacy Commission, said in a press release. "Spending extra money in hopes of earning free nights and flights has the very real potential to leave Americans feeling like they've been travel hacked when their credit card payments are due."

As a result of the challenges consumers have faced when attempting to redeem rewards, cash back cards are quickly growing in popularity, according to The Wall Street Journal. They are often much easier to understand; cash back can be applied to a credit card bill, or redeemed by gift card or check. They are also the most versatile options, as consumers aren't limited to certain airlines, hotel chains or stores at which they can spend their cash. also pointed out that, for the consumer, cash back is typically a better value than travel points. The demographic that would most likely benefit more from a travel rewards card than a cash back card is people who travel internationally frequently, according to NerdWallet. Other than that, stateside explorers and those more inclined to enjoy a staycation would probably benefit most from a cash back card.

Look out for yourself, too

Offering credit card rewards plans that benefit cardholders is important in strengthening relationships with your members. But you also need to ensure that your credit union is profitable. The Wall Street Journal commented that some industry experts are concerned that cash back offers aren't sustainable for financial institutions.

Bloomberg recently reported that JPMorgan Chase & Co.'s profit could fall between $200 and $300 million in the final quarter of 2016 due to the bank's new Sapphire Reserve credit card. Chase's and other banks' saving grace is the fact that most consumers usually don't cash in on their rewards in their entirety, Forbes contributor Robert Harrow wrote.

Offering a program that will benefit your members is important, but putting your credit union at risk isn't a good idea. Before deciding to offer any program, make sure that it will make sound financial sense.

Fostering loyalty

To consumers, rewards programs are important because they benefit them. But to a financial institution, the hope is that the program will improve member loyalty. However, many card providers have found that typical consumers are more dedicated to a specific type of rewards program than to the institution issuing the card.

"The whole idea of a reward is loyalty, but it is very difficult to create a memory or emotional attachment around cash," Barry Kirk, vice president of customer loyalty for card-loyalty at Maritz Motivation Solutions, a company that manages card-loyalty programs, explained to The Wall Street Journal.

For this reason, many institutions are beginning to devise ways to bring in business while continuing to make card programs attractive. For example, one bank began offering a 2.5 percent cash back rewards card to consumers who also took out a checking account and maintained a balance of at least $1,000, according to The Wall Street Journal. If a cardholder didn't have a checking account at the institution, or had a low balance, only 1.5 percent cash back would be issued.

Giving your members the opportunity to earn cash back, travel rewards or another perk for using your credit card is a great way to bring in new business or grow your relationship with current members. When deciding which rewards route to go, be sure you know what your members will want as well as how your institution will benefit. Finally, consider the effect it will have on loyalty - after all, that's the ultimate goal of any rewards program.


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