The State of Credit Card Rewards in 2024: Capturing Cardholder Loyalty

iSeatz

Apr 8, 2024 7 minute read

Credit card reward programs are a vital asset for card issuers, serving the dual purpose of incentivizing new sign-ups and retaining and rewarding existing cardholders. New cards with attractive rewards are constantly launched, giving consumers more choices. However, the challenge of rising interest rates looms large, potentially deterring consumer spending. Credit card companies must adapt by broadening their rewards and enhancing the overall user experience to stay competitive.

Card issuers are diversifying their rewards programs in response to evolving consumer tastes and a fiercely competitive landscape. They are expanding beyond traditional travel incentives to include rewards for daily spending categories such as dining, wellness, and fuel. Additionally, they're introducing more flexible methods for earning and redeeming points, ensuring their offerings align with their customers' varied lifestyles and preferences.

The newly released State of Loyalty: 2024 Credit Card Rewards Report, our third annual analysis of credit card rewards, offers a comprehensive benchmark for evaluating reward redemption opportunities and engagement strategies in the current credit card marketplace. The report, focusing on North American financial institutions that issue credit cards with travel and lifestyle rewards, provides a comparative analysis of data from 2023 and the current year, highlighting trends and shifts across the credit card rewards landscape.

Here are three key insights from the report that can help credit card companies looking to enhance their rewards programs and competitive edge:

#1. Offer More Redemption Options to Cardholders

While travel perks remain popular, card issuers recognize the appeal of rewards that integrate seamlessly into cardholders’ daily lives. The shift toward more choices and broader redemption options allows cardholders to personalize their reward experiences and maximize their earning potential.

Credit card loyalty programs are evolving to match consumer preferences and economic realities by expanding their rewards beyond traditional travel benefits. These include points redeemable for dining, activities, and gas and reflect a shift towards providing a holistic rewards experience; consumers are increasingly opting to redeem points for experiences that enhance their travel, such as unique dining opportunities and engaging activities.

In another of our reports, The Tipping Point for Travel Loyalty 2023, we found that nearly 50% of respondents reported purchasing additional products or ancillaries—such as tours, activities, and airport lounge passes—when booking travel online, underscoring the growing interest in enhancing travel experiences through added services.

Around 27% of consumers indicated that more diverse travel options would encourage them to book travel more frequently and spend more within their loyalty programs. They particularly value rewards related to dining (23%) and tours and activities (21%). Reflecting these preferences, 76% of credit cards offer points or credits for such activities, a 20% increase from last year. Additionally, rewards for live events are becoming more prevalent, with availability on half of the cards up by 5%. This shift towards offering experiential rewards, in addition to traditional travel benefits, meets consumer demands and gives issuers a competitive edge.

#2. Appeal to Younger Generations with More Relevant Rewards

Younger generations, including millennials, have a high appetite for travel. Thirty-eight percent plan three or more trips this year, and 29% are prepared to spend more for better rewards, compared with just 8% of the Silent Generation.

However, current credit card rewards, like the sought-after food delivery for Gen Z, don’t fully cater to them – just 24% of card programs offer those.

Rewards programs must evolve with relevant offerings and personalization to engage these key demographics. Despite a positive trend towards lifestyle rewards, more efforts are needed. The younger generations seek sustainability and specific benefits; enhancing digital experiences and personalization is also critical for appealing to this cohort. Capitalizing on the shift towards impactful rewards is essential for credit card issuers to innovate and retain these vital customer segments.

#3. Sustainability Shouldn’t Be a Missed Opportunity

As environmental consciousness grows among consumers, credit card companies can differentiate themselves by offering eco-friendly options like carbon offsets or points for sustainable products.

While some programs offer eco-friendly perks, such as rewards for purchasing energy-efficient products and bonuses for EV charging, the option to redeem points for sustainable actions remains elusive. This gap represents a missed chance for card issuers to appeal to an increasingly valuable customer base. Introducing carbon offsets, options for eco-friendly accommodations, or points redeemable for sustainable goods could enhance customer loyalty while attracting a conscientious demographic.

Download our State of Loyalty: 2024 Credit Card Rewards Report to uncover deeper insights into how sustainability options, among other reward categories, can reshape loyalty dynamics. It could be your key to unlocking new levels of customer loyalty while attracting new cardholders.