2015 Credit Card Rewards Report

Credit Card Rewards

Picking a rewards credit card is a big deal, and the market can be difficult to decipher – with hundreds of available offers, numerous rewards currencies and various restrictions to watch out for. And, the truth is, some issuers simply provide more value than others. Carefully comparing your options prior to submitting an application thus proves to be quite pivotal and can be the difference between reaping enough rewards for a plane ticket versus a small-value gift card.

CardHub has therefore taken on the task of reviewing the consumer credit card rewards market for you. We analyzed every non-cobranded rewards credit card offer from the 10 largest issuers and devised a grading rubric to provide a basis for comparison as well as to quantify issuers’ rewards policies. To check out our findings and tips for choosing a rewards card, read on below.

Main Findings

 

  • Americans currently leave roughly $4 billion in annual rewards value on the table – especially frustrating when you consider that we racked up $39 billion in credit card debt in 2013, $57 billion in 2014 and are projected for another $60+ billion in 2015.
  • The difference in rewards value between the best rewards credit card from the best issuer and the best rewards card from the worst issuer is $739.01 over the first two years the accounts are open.
  • The Arrival Plus Barclaycard is currently the best rewards card on the market. It yields $1,621.40 in travel rewards during the first two years an account is open, according to CardHub calculations and average consumer spending statistics.
  • Capital One is the best overall issuer for rewards, registering an 86.2% score in this report. Capital One rewards cards do well across the board, ranking in the top three for each category we evaluated.
  • Discover came in a close second, registering just 4.8 fewer percentage points than Capital One.
  • Redeeming rewards for travel tends to provide the most value across cards and issuers, with each rewards currency unit yielding an average value of 1.05 cents, relative to cash back – which provides 0.82 cents per point – and the least fruitful option, merchandise – offering 0.66 cents per point.

Best Rewards Credit Cards By Issuer

 
What’s the best rewards credit card each bank has to offer? CardHub determined the best card for each issuer based on how much monetary worth its rewards yielded through the first 2 years of account opening. Check out the results below:
 

Issuer Best Card Monetary Value of Rewards (Across 2 Years) Score (Max 5 Points)
American Express Blue Cash Preferred
Blue Cash Preferred® Card from American Express
$1,073 4
Bank of America BankAmericard Travel Rewards
BankAmericard Travel Rewards®
$972 4
Barclays Barclaycard Arrival Plus
Barclaycard Arrival Plus™ World Elite MasterCard®
$1,621 5
Capital One Venture Rewards
Venture® Rewards
$1,482 5
Chase Sapphire Preferred
Chase Sapphire Preferred®
$1,213 5
Citibank Double Cash
Citi® Double Cash Card
$1,141 5
Discover Discover it
Discover it Miles
$1,284 5
PNC Bank Cash Builder
PNC CashBuilder® Visa® Credit Card
$998 4
U.S. Bank FlexPerks
FlexPerks® Travel Rewards American Express® Card
$1,260 5
Wells Fargo Propel 365
Wells Fargo Propel 365 American Express® Card
$882 3

Back to Top

Tips for Choosing a Rewards Card

Rewards cards aren’t one size fits all. Different factors – such as the type of rewards currency and earning structure – suit some consumers more than others. Our tips below will help you pick the right card:

  • Identify Your Spending Interests – Strive to get a rewards credit card that aligns with your spending habits and interests. For instance, if you rarely dine out, do not pick a card that offers high earning rates on restaurant spending – rather, pick a card with extra on travel or gas.
  • Consider Both Earning & Redemption Value – To gauge how much value a rewards card can yield, it’s important to look at both sides of the rewards equation. A card with high earning rates might have low redemption rates, and vice versa, and that can drastically skew the offer’s value proposition.
  • Avoid Hassle If You’re Forgetful – If you know you’re the forgetful type, stay away from cards that feature rotating categories requiring sign-up. They prevent customers from earning bonus rates if the spending categories are not “activated” each quarter, resulting in a lot of wasted time, energy and earning potential.
  • When In Doubt, Think Cash Back – You will never have to worry about rewards devaluation with cash back cards, as you will be earning rewards in terms of dollars and cents. Points and miles cards, on the other hand, are quite vulnerable, however, because credit card execs can jack up the number of points or miles needed for a free flight or hotel room whenever they please.
  • Don’t Rule Out Annual Fees – Often times, cards with annual fees offer better initial bonuses and higher earning rates than free cards. Therefore, don’t discount a card simply because it charges a fee, especially if it’s low. Just make sure the rewards you reap will sufficiently outweigh the fixed costs (which will most likely be the case if you spend more than the average American).

Back to Top

Detailed Rewards Policies By Issuer

 

Qualifying Factor Amex BofA Barclays Cap One Chase Citi Discover PNC US Bank Wells Fargo
Offers Automatic Program Enrollment (Max 1 Point) 1 1 1 1 1 1 1 1 1 1
No Minimum Spending Required To Earn (Max 1 Point) 1 1 1 1 1 1 1 1 1 1
No Overall Earning Limit Imposed (Max 1 Point) 1 0.8 1 1 1 1 1 1 1 1
Earning Rate Does Not Vary Depending On Amount Spent or Time Period (Max 1 Point) 0.64 0.6 1 1 0.5 1 0.33 0.67 0.33 0.22
No Sign-up Required for Bonus Categories (Max 1 Point) 1 1 1 1 0.5 1 0.67 1 0.83 1
Ability to Combine Earnings Across Your Accounts (Max 0.5 Points) 0.5 0.5 0 0.5 0.5 0.5 0.33 0.5 0.42 0.5
Ability to Share Earnings With Other Members (Max 0.5 Points) 0 0.3 0 0.5 0.5 0.5 0.33 0.17 0.42 0.5
Ability to Utilize Transfer Partners (Max 1 Point) 0.55 0 0 0 0.35 0.12 0 0 0 0
Ability to Utilize Transfer Partners is Free of Charge (Max 0.5 Points) 0 0 0 0 0.25 0.2 0 0 0 0
Ability to Use Earnings to Offset Any Travel Purchase or Receive Cash Back Without Sacrificing Value (Max 1 Point) 0.36 0.8 1 1 1 0.2 1 0.33 1 1
Statement Credit Can Be Applied to Full Balance (instead of matching to specific charges) (Max 0.5 Points) 0.18 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
No Minimum Threshold Required to Redeem For Cash Back (Max 1 Point) (Max 1 Point) 0 0.2 0 0.6 0 0 1 0 0.17 0
Offers Low Redemption Value Volatility (Max 1 Point) 0.31 0.76 0.13 0.6 0.8 0.52 0.6 0.87 0.57 0.76
Offers 100% Transparency In Displaying Redemption Rate Details For Non-Members (Max 1 Point) 0.82 0.6 0 0.6 0 0.2 0.33 0.33 0.17 0.56
Earnings Are Granted Despite Account Inactivity (Max 0.5 Points) 0.5 0.5 0.5 0.5 0.5 0.4 0.5 0.5 0.5 0.5
Earnings Are Granted Despite A Missed or Late Payment (Max 0.5 Points) 0 0.4 0.5 0.3 0.5 0.5 0.5 0.5 0 0
Earnings Do Not Expire By Date (Max 0.5 Points) 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.17 0 0.39
Expired Earnings Can be Reinstated (Free of Charge) (Max 0.5 Points) 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.17 0 0.5
Does Not Advertise Points/Miles Cards as Cash Back Cards (Max 1 Point) 0.82 1 0.67 1 0.5 1 1 1 1 1
Issuer Informs Customer of Remaining Rewards at Time of Account Closure (Max 1 Point) 1 1 1 1 1 1 1 0.33 1 1
Offers Competitive Value (Max 5 points) 4 4 5 5 5 5 5 4 5 3
TOTAL SCORE (OUT OF 21 POINTS) 14.68 15.96 15.3 18.1 16.4 16.64 17.09 14.04 14.91 14.43
PERCENTAGE SCORE* 69.90% 76.00% 72.90% 86.20% 78.10% 79.20% 81.40% 66.90% 71.00% 68.70%

*Percentage Score is calculated by dividing the Total Score by 21 points.
Back to Top

Detailed Rewards Policies By Card

 

Card Names Card Score

(16 points max)
Card Limitations
American Express – Overall Score: 10.68
Platinum Card® from American Express 11.20 • Earnings cannot be shared with other members
• Transferring earnings to external loyalty programs is not completely free
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Statement credit cannot be applied to full balance (it must be matched to specific charges)
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
Blue Sky Preferred® Card from American Express 10.50 • Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
Blue Sky from American Express® 10.50 • Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
Blue from American Express® 10.20 • Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Statement credit cannot be applied to full balance (it must be matched to specific charges)
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
Blue Cash Preferred® Card from American Express 10.50 • Earning rate varies depending on amount spent or time period
• Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
• Despite being a “cash back card”, cash is actually earned in points
Blue Cash Everyday® Card from American Express 10.50 • Earning rate varies depending on amount spent or time period
• Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
• Despite being a “cash back card”, cash is actually earned in points
Amex EveryDay SM Preferred Credit Card 10.20 • Earning rate varies depending on amount spent or time period
• Earnings cannot be shared with other members
• Transferring earnings to external loyalty programs is not completely free
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Statement credit cannot be applied to full balance (it must be matched to specific charges)
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
Amex EveryDay SM Credit Card 10.20 • Earning rate varies depending on amount spent or time period
• Earnings cannot be shared with other members
• Transferring earnings to external loyalty programs is not completely free
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Statement credit cannot be applied to full balance (it must be matched to specific charges)
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
American Express® Gold Card 11.20 • Earnings cannot be shared with other members
• Transferring earnings to external loyalty programs is not completely free
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Statement credit cannot be applied to full balance (it must be matched to specific charges)
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
American Express® Green Card 11.20 • Earnings cannot be shared with other members
• Transferring earnings to external loyalty programs is not completely free
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Statement credit cannot be applied to full balance (it must be matched to specific charges)
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
American Express® Premier Rewards Gold Card 11.20 • Earnings cannot be shared with other members
• Transferring earnings to external loyalty programs is not completely free
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Statement credit cannot be applied to full balance (it must be matched to specific charges)
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earnings from that month are confiscated and earning power is disabled until account is returned to good standing
Bank of America – Overall Score: 11.96
BankAmericard Cash Rewards™ 12.50 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
BankAmericard Cash Rewards™ for Students 12.50 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
BankAmericard Travel Rewards® 11.40 • Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
BankAmericard Travel Rewards® for Students 11.40 • Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
BankAmericard® Better Balance Rewards™ 12.00 • There is an overall rewards earning limit per quarter
• Rewards earnings cannot be transferred to external loyalty programs
• Rewards earnings are only received if bill payments are made on time
Barclays – Overall Score: 10.30
Barclaycard Arrival Plus™ World Elite MasterCard® 10.50 • Earnings cannot be combined across accounts or shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
Barclaycard Arrival™ World MasterCard® 10.50 • Earnings cannot be combined across accounts or shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
Barclaycard® Rewards MasterCard® 9.90 • Earnings cannot be combined across accounts or shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• Despite being a “cash back card”, cash is actually earned in points
Capital One – Overall Score: – Overall Score: 13.10
Journey® Student Rewards 14.50 • Earnings cannot be transferred to external loyalty programs
Quicksilver® Rewards 14.50 • Earnings cannot be transferred to external loyalty programs
QuicksilverOne® Rewards 14.50 • Earnings cannot be transferred to external loyalty programs
Venture® Rewards 11.00 • Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earnings from that month are confiscated
VentureOne® Rewards 11.00 • Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earnings from that month are confiscated
Chase – Overall Score: 11.40
Chase Freedom® 9.50 • Earning rate varies depending on amount spent or time period
• Sign-up is required to earn in bonus categories
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• Despite being a “cash back card”, cash is actually earned in points
Chase Sapphire Preferred® 13.30 • Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
Citibank – Overall Score: 11.64
Citi® Double Cash Card 13.00 • Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Earnings will expire due to account inactivity
Citi Prestige® Card 11.70 • Cannot redeem for cash back and/or travel credit without sacrificing value
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
Citi ThankYou® Preferred Card 10.90 • Earnings cannot be transferred to external loyalty programs
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
Citi ThankYou® Preferred Card for College Students 10.90 • Earnings cannot be transferred to external loyalty programs
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
Citi ThankYou® Premier Card 11.70 • Cannot redeem for cash back and/or travel credit without sacrificing value
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
Discover – Overall Score: 12.09
Discover it 10.90 • Earning rate varies depending on amount spent or time period
• Sign-up is required to earn in bonus categories
• Earnings cannot be transferred to external loyalty programs
• Does not offer 100% transparency in displaying redemption rate details for non-members
Discover it Chrome 11.90 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Does not offer 100% transparency in displaying redemption rate details for non-members
Discover it Miles 13.50 • Earnings cannot be combined across accounts or shared with other members
• Earnings cannot be transferred to external loyalty programs
PNC Bank – Overall Score: 10.04
PNC CashBuilder® Visa® Credit Card 12.50 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
PNC Flex® Visa® Credit Card 8.80 • Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• Earnings expire by date and cannot be reinstated
• Issuer does not inform customer of remaining rewards at time of account closure
PNC points® Visa® Credit Card 8.80 • Earnings cannot be shared with other members
• Earnings cannot be transferred to external loyalty programs
• Cannot redeem for cash back and/or travel credit without sacrificing value
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• Earnings expire by date and cannot be reinstated
• Issuer does not inform customer of remaining rewards at time of account closure
U.S. Bank – Overall Score: 9.91
Cash+™ Visa Signature® Card 11.00 • Earning rate varies depending on amount spent or time period
• Sign-up is required to earn in bonus categories
• Earnings cannot be transferred to external loyalty programs
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Earnings expire by date and cannot be reinstated
FlexPerks® Select Rewards Visa® Card 10.40 • Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Earnings expire by date and cannot be reinstated
FlexPerks® Select+ American Express® Card 9.40 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Earnings expire by date and cannot be reinstated
FlexPerks® Travel Rewards American Express® Card 9.40 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Earnings expire by date and cannot be reinstated
FlexPerks® Travel Rewards Visa Signature® Card 9.40 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Does not offer 100% transparency in displaying redemption rate details for non-members
• Earnings expire by date and cannot be reinstated
Perks+ Visa Signature® Card 9.80 • Earnings cannot be combined across accounts or shared with other members
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Earnings expire by date and cannot be reinstated
Wells Fargo – Overall Score: 11.43
Wells Fargo Cash Back College Visa® Card 11.80 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
Wells Fargo Cash Back Visa Signature® Card 11.80 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
Wells Fargo Cash Back Visa® Card 11.80 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
Wells Fargo Home Rebate Visa Signature® Card 11.80 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
Wells Fargo Home Rebate Visa® Card 11.80 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
Wells Fargo Propel 365 American Express® Card 11.80 • Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
Wells Fargo Propel World American Express® Card 11.80 • Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
Wells Fargo Rewards Visa® Card 10.30 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Earnings expire by date
Wells Fargo Visa Signature® Card 9.90 • Earning rate varies depending on amount spent or time period
• Earnings cannot be transferred to external loyalty programs
• Minimum amount of earnings required for cash back redemption
• Does not offer 100% transparency in displaying redemption rate details for non-members
• If a bill payment is late for a given month, earning power is disabled until account is returned to good standing
• Earnings expire by date

Back to Top

Methodology

For each issuer, we scored all of their non-cobranded, consumer rewards cards according to the metrics laid out in the table below. These metrics encompass four main categories:

  1. Product Inclusion & Registration – Max 1 point
  2. Earning Capabilities – Max 5 points
  3. Redemption Capabilities – Max 5 points
  4. Overall Perks & Restrictions – Max 5 points

TOTAL: 16 POINTS
 
After tabulating the final scores for all of the cards, we averaged them to determine a comprehensive score for the issuer overall. In addition to this, we also selected the best card within each issuer and scored it under a factor called “Offers Competitive Value”, which yielded an additional 5 points (bringing the grand total to a maximum of 21 points). Details regarding the “Offers Competitive Value” factor are provided below the table. Once we have the issuer’s final score, we convert it into a percentage score by dividing the total number of points by 21.
 

Qualifying Factor Maximum Amount of Points Awarded How To Calculate Points Awarded
Product Inclusion & Registration – Max 1 point
Offers Automatic Program Enrollment 1 Award max point if the card qualifies for this factor.
Earning Capabilities – Max 5 points
No Minimum Spending Required To Earn 1 Award max point if the card qualifies for this factor.
No Overall Earning Limit Imposed 1 Award max point if the card qualifies for this factor.
Earning Rate Does Not Vary Depending On Amount Spent or Time Period 1 Award max point if the card qualifies for this factor.
No Sign-up Required for Bonus Categories 1 Award max point if the card qualifies for this factor.
Ability to Combine Earnings Across Your Accounts 0.5 Award max point if the card qualifies for this factor.
Ability to Share Earnings With Other Members 0.5 Award max point if the card qualifies for this factor.
Redemption Capabilities – Max 5 points
Ability to Utilize Transfer Partners 1 Award 0 points if card has no ability, 1/3 points if card has 1-10 transfer partners, 2/3 points if card has 11-20 transfer partners or 1 point if card has 21+ transfer partners.
Ability to Utilize Transfer Partners is Free of Charge 0.5 Award max point if the card qualifies for this factor.
Ability to Use Earnings to Offset Any Travel Purchase or Receive Cash Back Without Sacrificing Value 1 Award max point if the card qualifies for this factor.
Statement Credit Can Be Applied to Full Balance (instead of matching to specific charges) 0.5  

Award max point if the card qualifies for this factor.

 

No Minimum Threshold Required to Redeem For Cash Back 1 Award max point if the card qualifies for this factor.
Offers Low Redemption Value Volatility 1
Overall Perks & Restrictions – Max 5 points
Offers 100% Transparency In Displaying Redemption Rate Details For Non-Members 1 Award max point if the card qualifies for this factor.
Earnings Are Granted Despite Account Inactivity 0.5 Award max point if the card qualifies for this factor.
Earnings Are Granted Despite A Missed or Late Payment 0.5 Award max point if the card qualifies for this factor.
Earnings Do Not Expire By Date 0.5 Award max point if the card qualifies for this factor.
Expired Earnings Can be Reinstated (Free of Charge) 0.5 Award max point if the card qualifies for this factor.
Does Not Advertise Points/Miles Cards as Cash Back Cards 1 Award max point if the card qualifies for this factor.
Issuer Informs Customer of Remaining Rewards at Time of Account Closure 1 Award max point if the card qualifies for this factor.
TOTAL 16 POINTS

 
Offers Competitive Value – Max 5 points
 
In addition to the 16 points above, we also award a possible maximum of 5 points for this category.
 
We identified the best card from each issuer by calculating the 2-year monetary value of each offer’s rewards (including initial bonuses), minus any annual fees.
 
When calculating the card’s rewards value, we picked the best redemption option – travel, gift cards, cash back or merchandise – and used the average value for that redemption option to convert rewards currency into monetary terms.
 
This value correlates to points, according to the following tiers:
 

Points Awarded Consumer Cards Tiers
0 ≤ $379
1 $380 – 569
2 $570 – 759
3 $760 – 949
4 $950 – 1,139
5 $1,140 +

 
Tiers for the cards were determined using the following logic:
 
We calculated the monetary value that a 1% base rate card (with no annual fee or initial bonus) would yield across 2 years, and set that value as the bottom of the 2-point tier. We then repeated the process with a 2% base rate card, and set that value as the bottom of the 5-point tier. Each other tier was defined in equal increments.

 
The following spending assumptions were used to calculate each card’s monetary value:
 
We used spending data from the U.S. Bureau of Labor Statistics. Exact values were used whenever possible, but in certain cases – such as “Travel” – we combined categories like “Other Lodging” and “Public and Other Transportation” to create a more digestible list. For “Utilities”, we assumed that half of one’s utility expenses would be charged to a credit card, as certain types – electric bills, for example – typically aren’t put on plastic. For “Other” spending, we used the sum of small household spending categories: healthcare, apparel and housekeeping supplies, for instance.
 
Annual Consumer Spending By Category
 

Category Annual Spending Source
Gas $2,611 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Groceries $3,977 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Restaurants $2,625 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Hotels $649 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Airfare $537 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Entertainment $2,482 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Drug Stores $608 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Utilities $1,869 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Movies $102 http://variety.com/2015/film/news/movie-ticket-prices-increased-in-2014-1201409670/
http://www.marketingcharts.com/traditional/on-average-american-adults-say-they-went-to-5-movies-last-year-39161/attachment/harris-americans-movie-going-trends-jan2014/
Other $13,063 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report
Total $28,523 U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report

Ask the Experts

  1. What do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?
  2. Based on your knowledge of the market, how does reputation mesh with reality in terms of each major issuer’s rewards program?
  3. When should consumers first start focusing on rewards credit cards?
  4. How do credit card rewards programs make credit card companies money?
Back to All Experts

Brad D. Carlson

Associate Professor of Marketing at Saint Louis University, John Cook School of BusinessWhat do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?

Great reward programs are those that provide meaningful added value to consumers, while simultaneously building the brand and fostering stronger connections between the consumer and brand. In order to develop a reward program that delivers this kind of value, it is imperative that a company truly understands the desires and needs of their core customers, and this requires effective market segmentation, target marketing, and positioning (i.e., making sure consumers perceive a meaningful difference between your reward program and your competitors).

The best way you can develop a reward program that will truly incentivize consumers to use your card more frequently is to make it reasonable for them to achieve rewards that matter to them on some emotional level. The Southwest Visa card is a good example of this. Of course it provides points that can be redeemed for flights. However, what it delivers on an emotional level as a result of being able to travel more frequently is an opportunity to create memories and experiences...an unexpected getaway with a significant other, meeting up with your best friends for a weekend getaway, taking your family to see their grandparents. Not surprisingly, this ties in well with their long running slogan "You are now free to move about the country."

Although the specific tactics used by consumer and business cards may differ, the strategy should be the same...identify an unmet want or desire that is important to your core group of customers and then develop a reward program that helps satisfy those wants. Most importantly, as consumers use your card more frequently and consistently, they should derive more substantial rewards.

When should consumers first start focusing on rewards credit cards?

I think the best advice for consumers is to avoid using credit cards unless you have the resources and restraint to pay your balance in full each month. If you decide that using a credit card is the right choice for you, be sure to spend some time getting acquainted with the variety of reward programs offered. If you are going to use a credit card, it makes sense to choose one that will offer you some type of reward for doing so and the Internet makes it very easy to quickly find information about various cards, their reward programs, and any related fees. Ultimately, try to pick a reward program that best fits your interests and lifestyle.

How do credit card rewards programs make credit card companies money?

There are many ways that reward programs make money for credit card companies.

To begin, credit card companies make money every time a consumer uses their card to make a purchase. For each purchase, the card issuer receives a payment of one to three percent of the transaction amount. Given that reward programs are intended to increase the frequency with which consumers use their card, the result is increased fees collected from retailers.

Additionally, credit card companies make significant profits from a variety of fees - annual fees, cash advance fees, balance transfer fees, late fees - and these fees are more likely to come into play for consumers who actively use reward programs. For instance, although not all cards charge an annual fee, those that do tend to have the best reward programs. Given that increased use of a card with a reward program will result in greater rewards, consumers are more likely to accumulate debt on these cards as they feel that the cost of doing so is offset by the rewards achieved. Consider that in April 2014, the average U.S. household credit card debt, for those households carrying debt, exceeded $15,000, with average credit card interest rates around 15%, and those rates increase if you have late payments.

Taken together, it becomes evident that credit card companies make money on nearly every dollar you spend. The more appealing they can make it for you to use your credit card, the more likely it is they will eventually earn additional profits from increased fees.
Back to All Experts

Carlos Torelli

Associate Professor of Marketing at University of Minnesota, Carlson School of ManagementWhat do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?

Good reward programs are those that help the company fulfill their goals of deepening relationships with consumers (i.e., increased usage and revenue) while distinctively delivering value to the consumer (i.e., unique benefits). That is, good reward programs are sustainable over time because they contribute to the company's bottom line and distinctively deliver rewards/benefits that are aligned with consumers' needs and wants. Take for instance a co-branded airline mileage reward program. Such programs can be highly successful in increasing share of wallet (i.e., higher percentage of purchases with the company's credit card), while delivering unique benefits due to consumers' loyalty to the airline mileage program.

However, when these benefits are not unique, the program can become commoditized and lose its value in the eyes of the consumer. Because good reward programs are based on distinctively delivering value/benefits to consumers, their features have to be tailored to the unique needs of consumers. Thus features of consumer and business credit cards reward programs may be different, but the ultimate objective is to demonstrate to the customer that a card program distinctively addresses his/her needs.

Based on your knowledge of the market, how does reputation mesh with reality in terms of each major issuer’s rewards program?

When making any product choice, consumers should always pay attention to the option that best satisfies his/her needs. Reward credit cards are one of multiple options that should be considered and analyzed when choosing a credit card. There are a variety of reward programs that might or might not be appealing to consumers at different life stages. A savvy consumer knows to understand his/her needs, go through the different options available in the market, and then make the choice that provides the highest value in view of his/her needs. If you are not the kind of person who travels a lot, then airline mileage programs might not be for you and a cashback rewards program might be more appealing.

However, remember that good reward programs also contribute to the company's bottom line, so there is always a cost involved. Consumers need to assess the extent to which their intended usage (based on their distinctive needs) justify the cost (i.e., conduct a benefit/cost analysis). If the cost is not justified, a more basic credit card without "attractive" rewards might be a better choice.

How do credit card rewards programs make credit card companies money?

As I said earlier, good rewards programs make money, otherwise they are not sustainable. At the core, rewards programs exist to deepen relationships with consumers. The goal is to reward desirable behavior (i.e., behavior that contributes to the company's bottom line). Rewards programs that contribute to an increased share of wallet make money by adding extra revenues over a baseline condition without the rewards program. This should always be the natural reason for implementing a rewards program. To the extent that the extra revenue offsets the program cost, then there is a positive impact on the bottom line. Sometimes rewards programs might not break even via added transaction volume/revenue (e.g., airline programs among low-revolving and affluent consumers) and need to be made sustainable by adding extra fees (to fully compensate costs). However, the best program is the one that delivers value to consumers and keeps them wanting to come back, even when a fee is in place. In this case, the fee can even become a "signal" of high value that consumers happily accept.
Back to All Experts

Yuping Liu-Thompkins

Professor and Chair of Marketing & E. V. Williams Faculty Research Fellow at Old Dominion University, Strome College of Business What do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?

The answer to this question depends on good for whom. The consumer or the business? I will attempt to answer what I consider to be the key characteristics of a good program from both perspectives.

Good for consumers:
  • Real economic benefits. This is fairly straightforward. People like deals. With many reward credit cards (and general reward programs) in the marketplace right now, having real economic benefits has become almost the minimum requirement for survival.
  • Convey a sense of indulgence and/or prestige and status. These relate to the soft benefits of membership. When everyone is offering the equivalence of 1% cash back, the real competitive advantage then comes from the other non-economic, softer benefits. The airline reward cards are popular among frequent flyers not only because they can earn miles by using the card, but also because of the extra benefits (such as luggage policy, upgrades, and club access). Research has also shown that people may prefer rewards that give them a sense of pampering and indulgence.
  • Simplicity. The rules such as point ratio, reward threshold, and point expiration should be easy to understand. Too often marketers make the program way too complicated to understand. The consequence is that consumers simply stop using the program. Reward redemption should be relatively straightforward too.
Good for the program-offering businesses:

Although many of what's good for consumers make a program more appealing to consumers, they do come at a cost to the business. Every consumer would love a card that offers a 10% reward across the board. But no company can sustain that level of cost. So from a business perspective, there are other things to take into consideration in order to create a good reward program. These additional considerations are:
  • Controlled liability from unredeemed points. This is a real issue on many seasoned loyalty program marketers' mind, but can be neglected with a new reward program provider. Rather than realizing the problem too late, it's best to build systems in place to control liability right from the beginning.
  • Habit-forming. This is something that only started to receive some attention in recent years, because of a few popular press books on habit. Now everyone is thinking about habit. In my own research, I have looked at this. There are various design elements that may help consumers build the habit of using your card/product or impede that process. So in designing a good reward program, this element should be considered.
  • Good data analytics. Ultimately anyone can match what your card is offering, no matter how good of a deal it is. I believe the real differentiating point is how strong the data analytics behind the reward program is. The truly good reward programs crunch the data from the program and feed that intelligence into their marketing and partnership decisions.
For the second part of this question, I think the key differences will be coming from what kind of benefits are sought after for each type of card. Research has shown a need to match up effort with rewards. Since business credit cards are based on mostly utilitarian purchases, utilitarian rewards (e.g., $50 gift card to OfficeMax may be more appealing than a $50 spa gift card). The opposite is true for personal cards. Another big difference is that while consumers may be looking for status, business cardholders are looking for success. So a business reward card should focus on helping its cardholders achieve success with its business, or convey a sense of success. American Express, for example, is known for its OPEN Forum that provides useful information for small business owners.

Based on your knowledge of the market, how does reputation mesh with reality in terms of each major issuer’s rewards program?

I am not really aware of a big reputation market for credit cards. A lot of credit card signup and usage come from awareness (either through direct mailing of offers or through advertising). There may be die-hard fans that pay real attention to how credit cards compare and fare. But for a majority of consumers, this is a fairly low-involvement product. So it's often based on when they see an appealing offer, they would get it. The only credit card that has a real sort of reputation is American Express. But that doesn't seem to overcome the barrier of its high fees for some of the Amex cards. So overall, people are fairly deal-oriented when it comes to this market.

When should consumers first start focusing on rewards credit cards?

Consumers who have tons of personal debt to deal with probably should not be looking at reward credit cards, as these cards usually do not compete that well on interest rate and other terms and conditions. Even with some cards reward certain purchase categories at 5%, the interest rate for any personal debt is likely to exceed that. Hence, I consider reward credit cards to be more suitable for those who use credit cards more as a revolving account, a standard form of payment that they are going to pay off either each month or within very short intervals. So I would say the general rule of thumb is to eliminate credit card debt and high-interest personal loans first, and then consider getting a reward credit card.

How do credit card rewards programs make credit card companies money?

I may be wrong, but from what I understand, they don't really, at least not directly from the program, unlike some airline reward programs do. Instead, reward programs are a way of getting consumers to sign up for the card and to use the card more. Credit card companies can then make more money out of transaction fees, interest income, etc.
Back to All Experts

Morgan Ward

Assistant Professor of Marketing at Southern Methodist University, Cox School of BusinessWhat do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?

A good rewards program is relevant. That is, the rewards need to mean something to the consumer. The rewards need to be attainable and differentiated. That is, people need to, at some point, actually procure a reward and also feel that the reward is somewhat unique to the card they are using. Also, the reward has to be clearly understood and expressed to the consumer. We only use things that we understand!

When should consumers first start focusing on rewards credit cards?

I think the rewards programs should be secondary to interest rates when consumers are choosing an appropriate card. Sometimes, a credit card will offer compelling rewards but it’s at the cost of the financial health of the customer insofar as the customer has to incur high interest rates and penalties for non-payment.

How do credit card rewards programs make credit card companies money?

Not my area of expertise, but my understanding is that the reward providers pay the credit card companies for the opportunities to provide the rewards. It is a marketing cost like any other and it gets these companies access to leads that they can parlay into a longer term relationship with a customer.
Back to All Experts

Hooman Estelami

Professor of Marketing at Fordham Schools of Business What do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?

The main characteristic that a good rewards program has is its relevance to the consumption patterns of the cardholder. Programs that align their reward points to the purchase behavior of the buyer, for example with respect to product categories dominant in the shopping basket, tend to benefit consumers most, and at the same time bring higher transaction volume to the cardholder. The nature of this relationship has to be researched closely through analytics to find the right matching customer for the right program.

Based on your knowledge of the market, how does reputation mesh with reality in terms of each major issuer’s rewards program?

Reputation does not have to be an indicator of a good program. In fact, research on brand positioning in certain financial markets shows that brands with higher reputation levels do not always offer the better deals. This is simply because they are able to benefit from the recognition associated with their brand names and consumers tend to trust them for the same reason, yet they may receive a less competitive offer simply because they have been mesmerized by the brand.

How do credit card rewards programs make credit card companies money?

Increased transaction volume translates into higher fees collected from the sellers. Increased transaction volume also translates into more opportunities for charging interest on balances, and other forms of fees. Partnerships can also result in revenue generation for the credit card companies.
Back to All Experts

Alexander Chernev

Professor of Marketing at Northwestern University, Kellogg School of ManagementWhat do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?

Successful loyalty program create value both for customers and the company.

For customers, loyalty programs can create three types of benefits: (1) functional benefits, such as extended shopping hours (e.g., Costco) and access to special offerings; (2) monetary benefits, such as cash back or points; and (3) psychological benefits, such as sense of belonging, affiliation, or exclusivity.

For companies, loyalty programs create value by (1) increasing customer loyalty and purchase quantity, (2) providing companies with data reflecting the behavior of each individual customer, and (3) enabling the company to conduct one-on-one communications and develop customized special offerings/promotions
Previous 2015 Small Business Credit Card Study   Maxed Out Credit Card: Tips, When It Makes Sense & More Next
DISCUSSION

Our content is intended for general educational purposes and should not be relied upon as the sole basis for managing your finances. Furthermore, the materials on this website do not constitute legal advice and should not be relied upon as such. If you have any legal questions, please consult an attorney. Please let us know if you have any questions or suggestions.