Travel bans, shelter-in-place orders and social distancing as a result of the coronavirus have changed many aspects of traditional consumer experiences. The classic weekend outing of dinner and a movie has been replaced with contactless food delivery and streaming content. From small businesses to major corporations, the need for digital tools like Dropbox, Zoom and Slack have become essential as many are faced with work-from-home orders. According to corporate credit card and financial services provider, Brex Inc., since March 16, remote collaboration and delivery spending are up 63%. In response to societal shifts, credit card companies are altering their rewards programs to fit new consumer spending behaviors.
Credit Card Rewards Are Preferred & Expected By Most Consumers
Since the 1980s, credit card rewards have enticed consumers to open personal credit card accounts and increase their spending habits. With niche reward offers incentivizing a variety of buying habits and interests, from travel to dining, competitive rewards, rates and sign-up bonuses went from being viewed as an extra perk to an expected basic account holder benefit. According to Business Insider, 75% of credit card holders confirm their preferred personal credit cards offer some type of rewards incentive.
The type of reward offered by personal credit card companies is a key motivational driver among consumers. Credit card offers, including simple cash-back options and points exchanged for travel, accommodations or experiences, can heavily influence consumer card selection. According to a consumer survey conducted in June 2019, 64% of respondents who possessed at least one or more personal credit cards reported owning a credit card that offered cash-back incentives.
Cash-back is also historically the most frequently redeemed reward among consumers. Results from the Total Systems Services (TSYS) 2018 Consumer Payment Study indicated that 80% of respondents with credit cards that offered cash-back rewards redeemed their points earned for cash. Redemption of cash-back offers for direct deposits, reward checks or statement credits trumped exchanging reward points for merchant gift cards, travel and experiences. Similarly to the value of seamless transactions, consumers also craved frictionless reward exchange systems from their credit card companies. Travel and experience redemptions for reward points do not have a reputation for being account-holder friendly and are often perceived as complicated, limited and frustrating. Conversely, getting access to cash funds empower consumers with more control, optionality and flexibility.
Crisis & Convenience Spending Spur Credit Card Companies To Shift Rewards
As a result of major transitions in March, many financial companies and banks announced new incentives for their credit card holders based on essential purchases consumers are prioritizing during quarantine and social distancing. Ron Shevlin, Director of Research at Cornerstone Advisors, said, “Whether it is grocery delivery or subscriptions, the latest rewards incentives provide card holders with cash-back based on spending related to transactions motivated by convenience.” The efforts to align credit card rewards points with new consumer spending habits may encourage consumers to maintain their card loyalty and continue using their credit cards during this time of uncertainty. Here are some examples of credit card companies offering rewards for essential COVID-19 purchases:
Grocery Rewards From Credit Cards
Credit card companies are not strangers to offering points for day-to-day grocery shopping, however COVID-19 has completely changed the impact of buying essential food and supplies. Consumers are encouraged to seek options for grocery delivery to avoid making necessary trips to physical brick-and-mortar storefronts. Amazon and Walmart are two brands that have prioritized rewards for their respective grocery services prior to COVID-19. Amazon offers 5% back for Amazon Fresh and Whole Foods delivery purchases to customers with Amazon Prime Rewards Visa cards. Similarly, the Walmart Rewards Card backed by Capital One offers cardholders 5% for purchases made for grocery pick-up or delivery via the Walmart website or app. Both of these cards provide cash-back redemption options which may be helpful to customers hoping to stretch each dollar during quarantine.
Although neither brand’s grocery rewards program was launched in response to recent events, both embraced the opportunity to promote their grocery incentives to consumers seeking delivery options for their grocery purchases for the first time.
Food Delivery Rewards From Credit Cards
American Express has been partnering with Uber since 2014 with the partnership focused around ride-sharing transportation. Since there is no way to maintain social distancing during Uber rides, American Express shifted its rewards point offer from Uber rides to UberEats. Platinum card holders who typically get $15 per month offered toward Uber rides can now apply their Uber credits for Uber’s food-delivery service.
Meanwhile, Chase has partnered with delivery service DoorDash. Account holders with Chase Sapphire Preferred Cards receive complimentary DoorDash subscriptions (typically $9.99 per month) entitling them to free deliveries (with a minimum $12 food purchase) and lower service fees from DoorDash-partnered establishments. To offset the cost of food delivery, Chase customers will also receive $60 statement credits for using DoorDash services in 2020.
Remote Collaboration Rewards From Credit Cards
Corporate credit card company Brex, which focuses on providing credit lines for startups, is offering its account holders rewards for investing in work from home (WFH) essentials. The business-to-business financial brand recently transitioned reward points for travel, dining and rideshares to instead incentivize subscriptions for professional digital and virtual collaboration tools to help its customers maximize working remotely. According to Business Insider, Brex has committed to multiply rewards points for collaboration tool purchases, including Zoom, Slack, GoToMeeting.com, Gong and Monday.com, by seven. In addition to new rewards offers, Brex account holders can also apply special discounts to save 20-25% off new annual subscriptions to Slack, Zoom and Monday.com purchased during COVID-19.
Streaming Services Rewards From Credit Cards
COVID-19 is giving streaming services a bright moment in the sun. As content subscription services for music, movies, TV and other video content compete for viewer attention, credit card companies are incentivizing purchases made for these services. From Amazon Unlimited Music to YouTubeTV, American Express’s Blue Cash Preferred Card is currently offering six times rewards points for subscriptions made to 28 different streaming and on-demand content providers. Likewise, the U.S. Bank Cash+ Visa Signature card is now offering 5% back for TV, internet and streaming service purchases.
Credit Card Companies Let Users Convert Rewards To Give Back During COVID-19
In addition to altering reward points to reflect new shopping behaviors, many credit card companies and issuing banks have partnered with nonprofit charities nationwide to provide account holders the opportunity to convert reward points into donation dollars.
American Express announced a partnership with nonprofit site JustGiving to help account users find a charity to which they can make direct donations by converting rewards points to dollars. In an effort to further minimize the negative impact of COVID-19, American Express has also committed to matching all donations made to Feeding America via JustGiving, up to $1 million.
While air travel remains at a necessary standstill, both Southwest and United Airlines have announced partnerships to provide credit card account holders with opportunities to turn points (usually used for air miles) into philanthropic donations. Southwest reward points redeemed for donations to Team Rubicon support the cost of deploying the efforts of first responders and veterans in communities most impacted by COVID-19. United Airlines, partnered with Americares and The Dream Foundation to let card holders convert their United MileagePlus miles into dollar donations. United has pledged to match each rewards point donation redemption to maximize the support and aid efforts and help individuals affected by COVID-19.
How Credit Card Companies Treat Card Holders Now Will Impact Future Brand Loyalty
The credit card market is fiercely competitive. Customer loyalty is powerful, and financial brands that harness the opportunity to be noble, flexible and responsive to their customers' needs amidst trying times will have the greatest propensity to maintain positive customer relationships. Credit card brands that embrace the struggle their target customers are facing and respond by deploying innovative and useful solutions will reap the rewards of strong brand recognition in the future.
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