How Consumer Trends Are Shifting Credit Card Rewards

David Herpers is the Head of Digital Bank at Credit One Bank. His expertise includes wealth management, banking and product management.

For decades, credit card rewards were static and predictable. However, the last year and a half expedited big shifts: Credit card issuers scrambled to adapt to shifting consumer demand and spending patterns.

Some issuers reacted quickly early in the pandemic, introducing rewards or benefits to better align with trending consumer purchases.

Travel came nearly to a halt, and travel rewards decreased in desirability. Attention shifted to offering rewards for everyday expenses such as groceries, food delivery and even streaming services. This set the stage for a competitive landscape in which banks, credit unions and card issuers had to keenly focus on keeping current with rewards trends.

As a product leader for an issuer of consumer credit cards, I’ve seen these shifts firsthand. And with spending predicted to surge as the country continues to open, here are three trending topics right now in credit card rewards that I predict will have staying power.

A New Era For Credit Card Rewards

Many changes over the last year have brought more value to regular, everyday spending, which can be a big benefit for those who historically haven’t put much thought into credit card rewards.

A common practice for many credit card companies is to charm users with a list of flashy sign-up bonuses or benefits, such as airport lounge access, reimbursement of checked bag fees, invitations to private food or travel events not available to the public, etc. But all these perks come at a cost, with some new cards having annual fees of up to $350, $500 or even $600.

To entice those in search of a lower annual fee, I’m seeing more and more companies fine-tuning offers to meet customer needs or surprise and reward affinity. Issuers are leveraging partnerships with outside brands in creative ways or creating co-branded credit cards for niche markets — think, a credit card for pet lovers or a credit card specifically for sports team fanatics. These opportunities offer more direct benefits, like discounts on merchandise, free passes and cash-back multipliers, and they can help consumers maximize purchasing with the brands they already love.

Travel is seeing this, too. To avoid being locked into a single airline or hotel program, some credit card issuers are focusing on types of everyday adventures, with rewards for visits to amusement parks, sporting events or even the country’s national parks.

Redemption Flexibility Is Here To Stay

Travel credit cards with flexible redemption options are likely to remain popular as tourism slowly makes its return. I’m finding that modifying how cardholders can redeem rewards in any category continues to stay top of mind for issuers as the demand for more customization and choice grows.

Some issuers are experimenting with offers and redemption categories on a rotating basis to see what resonates, expanding the freedom of choice in redeeming points to new industries, partners and products. One example: offering redemption of accumulated travel points for non-travel-related purchases at the same value per point or converting those points into cash back.

The Competitive Landscape Remains

Fortunately for consumers, I believe the concepts of continuous and flexible rewards are here to stay. Rewards programs and credit card issuers are better for it, and competition among the large issuers should deliver more value to customers.

Credit issuers should be thinking about a full suite of rewards products — consumer, commercial, young adult, elite, affinity, etc. — whether the goal is to reach people focused on building up savings, traveling, budgeting or anything in between. Consumers are likely to enjoy more options and the flexibility to choose what rewards best meet their particular needs.

Ultimately, a long-term rewards program that helps position customers to achieve their financial goals and earn more on their regular expenses should be a top priority of any credit card issuer looking to stay competitive.

In addition to robust rewards programs, digital capabilities are imperative to the overall customer experience, including ease of use, accessibility and redemption options. Routine updates to online platforms and mobile app advancements are necessary to stay relevant.

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