How card issuers can drive long-term loyalty from card members

Dec 4, 2020

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Credit Cards Week banner for the 2020 TPG Awards

As Credit Cards Week at the 2020 TPG Awards concludes, we want to shift our focus from this year into the future. While this year has presented unprecedented difficulties, we nevertheless saw a range of innovation from card issuers — and this fall has seen a wealth of new, limited-time offers.

However, as we look ahead to 2021, how can issuers can drive card members’ long-term loyalty?

These companies generally only make money when you use your card. So, card issuers usually don’t make a profit on cardmembers that sign-up for cards offering large bonuses, shelve the card after earning the bonus and close the card a year or two later.

We asked readers several survey questions while voting for the TPG Awards winners this year. Interestingly, 39% of respondents plan to apply for a new credit card in 2021. And some consumers — including many of us at The Points Guy — sign up for multiple cards most years to chase limited-time card offers.

Related: 7 cards TPG staffers added to our wallets this quarter

That said, card issuers need to drive long-term loyalty from cardmembers to maximize their profits. And, the effort of credit card issuers to drive long-term loyalty can benefit cardholders. So here are seven ways I believe card issuers can improve card member loyalty.

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In This Post

Make it easy to keep and use cards

Woman on street in large city holding a wallet
(Photo by Orli Friedman/The Points Guy)

There are two types of cards that I automatically keep in my wallet:

Although I rarely use some of these cards, I can easily justify paying their annual fees. Even in the case of the hotel credit cards with modest annual fees, I’m happy to keep the cards for their annual, free-night certificates.

But, card issuers don’t benefit from consumers who keep their cards without putting any spending on the cards. We’ve even seen some card issuers close or decrease the credit limit on unused and underutilized cards. So, especially in the case of no-annual-fee cards, card issuers need to encourage consumers to use their cards. This is likely why Chase recently improved the Chase Freedom Unlimited‘s earning rates and created the Chase Freedom Flex.

Card issuers can drive long-term loyalty through the combination of benefits that justify annual fees and incentives for cardholders to use their cards. However, as I’ll discuss in other sections of this guide, improved earning rates aren’t the only way to encourage card members to use their cards.

Related: Why you should get (and keep) a no-annual-fee credit card

Unique, must-have perks

The American Express Centurion Lounge at JFK Airport
Centurion Lounge access is a compelling reason to be loyal to American Express. (Photo by Zach Griff/The Points Guy)

Some cards offer unique must-have perks that can encourage long-term cardholder loyalty. For example, here are some cards that a cardholder may keep long-term because they don’t want to lose one or more of the card’s perks:

The information for the Hilton Aspire Amex card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Out of these perks, only Centurion Lounge access is unique to being a cardmember. After all, you could buy a Delta Sky Club or Admirals Club membership or earn Hilton Diamond status organically — though being a cardmember is often a less-expensive way of gaining these perks.

Perks such as Centurion Lounge access also provide emotional value to some cardholders. For example, I know I’m not getting enough value from my Amex Business Platinum Card to justify paying the $595 annual fee (see rates and fees) right now. But, I’m irrationally keeping the card, because I know I’ll want Centurion Lounge access once the pandemic subsides and I hit the road again. As such, card issuers can lean into these unique, must-have perks to improve long-term loyalty.

One other type of unique must-have perk that often encourages me to keep and use a card is a high earning rate on a spending category that I use frequently. For example, I currently keep the Citi Premier® Card in my wallet for an effective 5.1% return at gas stations (based on TPG’s most recent valuations). However, I’ll only stay loyal as long as another card doesn’t rival the earning rate and my spending level in the category remains high. So, as I discuss later in this guide, card issuers must frequently reassess their perks to remain relevant.

Finally, it’s worth pointing out one of the most notable trends of the past year: growth in cobranded perks. In 2020 alone, we’ve seen the following new partnerships launch:

As card issuers seek to further engage with their customers’ lives in 2021, adding new, exciting partnerships and offers would drive notable long-term loyalty.

Related: Is your premium travel card offering enough perks during the pandemic? A card-by-card guide

Surprise-and-delight campaigns

goodie bag
A surprise gift from a loyalty program or card issuer can help improve loyalty. (Photo by South_agency/Getty Images)

If you frequently visit a local small business, you may find that the merchant sometimes offers you a complimentary surprise. For example, your favorite restaurant might provide you a free dessert. Your favorite coffee shop might offer you a free cup of coffee. And your local golf course may give you a complimentary bucket of range balls. All of these perks are to recognize and reward your loyalty.

Some card issuers have also recognized their most valuable customers with surprises. For example, Amex has sent holiday gifts to targeted customers and has occasionally sent Centurion cardholders gifts. And Amex has even surprised Centurion lounge visitors with holiday gifts a couple of years ago.

Related: American hyped holiday cheer and gifts, but delivered me disappointment

But card issuers could make their surprise and delight campaigns more personal and targeted. For example, suppose Chase knows you use your Chase Freedom Unlimited every morning for a $5 purchase at a coffee shop. In that case, the issuer could occasionally provide you a $5 statement credit for your purchase at that coffee shop. And, if Amex knows you used your Amex Platinum Card to book flights to Hawaii and a Fine Hotels & Resorts hotel in Hawaii, the issuer could deliver a note and small gift to your room.

These surprise and delight gestures can build long-term cardmember loyalty. I was in the TPG office once when Brian Kelly, our founder and CEO, received a Centurion cardholder gift, and I can attest that he was sincerely pleased. Likewise, my parents are loyal to Capital One, primarily due to a positive experience many years ago. So, although some cardholders may not be impressed by small gifts, surprise-and-delight campaigns have the potential to boost long-term loyalty for relatively little cost.

 Related: 8 ways for elite status perks to remain relevant during the pandemic

Valuable rewards

Hyatt Mayakoba
Being able to transfer Chase Ultimate Rewards points to World of Hyatt may keep you loyal to Chase. (Photo by Victoria Walker/The Points Guy)

When voting for TPG Awards winners, we asked respondents to select their three most important considerations when applying for a new credit card. The top three responses were:

This makes it clear that TPG readers care about rewards. As such, to drive long-term loyalty, card issuers need to maintain the value of the rewards offered. For transferrable currencies, this means periodically adding new transfer partners, improving transfer ratios, launching transfer bonuses and boosting the value of non-travel redemptions.

And as new card products enter the market or improve their rewards structure, card issuers must reevaluate their rewards’ competitiveness to maintain current cardholders.

Related: Why you should double down on credit card points right now

Personalized perks and bonuses

Woman and child sitting on couch using tablet
A personalized offer may bring joy to your face. (Photo by JGI/Jamie Grill/Getty Images)

Card issuers offer targeted offers through programs like Amex Offers, Chase Offers and Bank of America’s BankAmeriDeals. And these targeted offers are often something I consider when deciding whether it’s worth keeping a card. However, by taking these targeted offers to the next level, issuers could seriously drive long-term loyalty.

Specifically, card issuers know which of their cards you have, and they know what the average consumer in your demographic spends. So, card issuers could attempt to snatch loyalty from other issuers by offering bonus spending opportunities in categories where you aren’t currently spending on their cards. Of course, for the loyalty to be long-term, issuers would need to find the sweet spot that keeps you spending on their cards, but it would be a solid strategy to pursue.

Card issuers could also boost long-term loyalty by offering customized benefits and earning rates. For example, just as you can choose a preferred airline for your airline fee credit on the Amex Platinum, perhaps you could also select one hotel or restaurant for 10x earning. Or maybe card issuers can offer targeted challenges that let you earn rewards based on your spending and redemption activities. There are many ways card issuers could increase engagement and hence drive long-term loyalty. Enrollment required for select benefits.

Related: Which card should I use? A pandemic-era guide to navigating card perks and benefits

Educate cardholders about card benefits

Woman looking pensively at laptop
It can be difficult to figure out how to maximize credit card benefits and rewards on your own. (Photo by fizkes/Shutterstock)

When speaking with family and friends, I’m often surprised to learn how little they know about their card benefits. And it’s been great to see some of these friends and family members begin to use card benefits such as lounge access, purchase protection and trip delay protection after a short crash course. Some of these same friends and family have also started to transfer rewards to partners instead of merely booking travel through the card issuer’s travel portal.

For most of my friends and family, this knowledge of how to use their card keeps them loyal. They could earn more rewards by switching to another card or program, but they instead stay with the card and program they know. So card issuers could boost long-term loyalty by providing better education about their card benefits and rewards.

Related: 10 credit cards that can get you $1,000 or more in first-year value

High-quality customer support

Happy man talking on his cell phone with his laptop on his lap
(Photo by 10’000 Hours/Getty Images)

Only 15% of respondents to our TPG Awards survey chose customer service as one of the three most important considerations when applying for a new credit card. I can’t fault most respondents for not ranking customer service ahead of other options such as sign-up bonus, value of rewards and annual fee. Nonetheless, customer service can make or break a card member’s long-term loyalty.

For example, I’ve almost always gotten knowledgeable and friendly phone representatives when calling American Express. On the other hand, I’ve been so frustrated with Citi’s phone support and website at times that I’ve considered calling it quits on my Citi credit cards. And my parents won’t carry any Chase credit cards due to a poor experience many years ago.

Providing high-quality customer service is an underrated but critical element of long-term cardmember loyalty.

Related: How have card issuers measured up during the pandemic

Bottom line

Loyalty is a difficult aspect for card issuers to master. After all, some card members remain loyal to a card simply because it was their first card or they like the design. Meanwhile, other card members chase welcome bonuses, low interest rates or 0% ARP offers. And some cardholders use their cards in illogical ways.

All that said, card issuers have a strong financial incentive to figure out what will make you loyal in the long-term, and this is especially true if you are one of the issuer’s most valuable card members. I expect we’ll see card issuers drastically increase cardmember loyalty as they shift toward better personalization of offers and benefits.

For rates and fees of the Amex Business Platinum Card, please click here.

Featured image by Bloemenmarkt/Getty Images.

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Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.