How card issuers can drive long-term loyalty from cardmembers in 2022
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Editor’s note: This post has been updated with new information.
However, as we start 2022, how can issuers drive long-term loyalty?
Credit card companies generally only make money when you use your card. So, card issuers usually don’t profit from cardmembers who sign up for cards offering large bonuses, shelve the card after earning the bonus and then close the card a year or two later. Card issuers need long-term relationships with cardmembers to maximize their profits.
Here are seven ways I believe card issuers can improve cardmember loyalty.
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Make it easy to keep and use cards
There are two types of cards that I never consider closing:
Although I rarely use some of these cards, I benefit from keeping these cards open. After all, the no-annual-fee cards keep my credit utilization ratio low and account age high. And I happily keep my hotel credit cards open since their annual free night certificates typically provide more value than their annual fees.
But card issuers don’t benefit from consumers who keep their cards but don’t spend much on them. 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 find ways to encourage consumers to use their cards. This is likely why Chase improved the Chase Freedom Unlimited‘s earning rates and created the Chase Freedom Flex. Likewise, programs such as Citi Merchant Offers and Amex Offers encourage consumers to engage with the programs and use their cards.
However, as I’ll discuss in other sections of this guide, improved earning rates and statement credits aren’t the only way to encourage cardmembers to use their cards.
Unique, must-have perks
Some cards offer unique perks that can encourage long-term cardholder loyalty. For example, here are some cards that a cardholder might decide to keep long term rather than lose one or more of the card’s perks:
- The Platinum Card® from American Express and The Business Platinum Card® from American Express: Amex Centurion Lounge access when flying any airline and access to Delta Sky Clubs when flying Delta on a same-day flight.
- Capital One Venture X Rewards Credit Card and Capital One Venture Rewards Credit Card: Capital One lounge access, complimentary for Venture X cardholders and up to two free visits per year for Venture cardholders.
- Hilton Honors American Express Aspire Card: Top-tier Hilton Diamond status.
- Citi® / AAdvantage® Executive World Elite Mastercard®: Admirals Club membership, which provides Admirals Club access when flying American.
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 having a specific card or cards. After all, you could buy a Delta Sky Club or Admirals Club membership, get access to a Capital One lounge when flying in a premium cabin on select airlines or earn Hilton Diamond status organically. But having one of these cards is often a less expensive way of gaining these perks.
Some cardholders also covet having perks such as Centurion Lounge access. For example, I plan to keep a card that offers Centurion Lounge access for the foreseeable future because I cherish comfort when transiting airports, even if the cost of the card doesn’t make financial sense. Card issuers can lean into these emotional attachments to help improve long-term loyalty.
Another 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 the 3 points per dollar earnings on gas purchases and 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.
Finally, it’s worth pointing out that one of the most notable trends of the past two years is growth in cobranded perks. For example, in the past two years, we’ve seen the following new partnerships launch:
- Chase and DoorDash, Lyft, Peloton and GoPuff.
- American Express and Equinox, ONDA, Panera, Equinox, Walmart+ and SoulCycle.
As card issuers seek to further engage with their customers’ lives, adding new partnerships and offers will likely drive long-term loyalty.
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 with 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 these types of surprises. For example, Amex has sent holiday gifts to targeted customers and has occasionally sent Centurion cardholders gifts. Amex even surprised Centurion lounge visitors with holiday gifts a couple of years ago.
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. Or, if Amex knows you used your Amex Platinum Card to book flights to Hawaii and a stay at a Fine Hotels & Resorts hotel in Hawaii, the issuer could deliver a note and small gift to your room.
These gestures can build long-term cardmember loyalty. I was in the TPG office once when Brian Kelly, TPG’s 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. Although some cardholders may not be impressed by small gifts, these campaigns have the potential to boost long-term loyalty for relatively little cost.
When voting for the TPG Awards winners in 2020, we asked respondents to select their three most important considerations when applying for a new credit card. The top three responses were:
TPG readers clearly care about rewards — which means that, to drive long-term loyalty, card issuers need to maintain the value of the rewards offered. For transferrable currencies, this could mean periodically adding new transfer partners, improving transfer ratios, launching transfer bonuses or boosting the value of non-travel redemptions.
As new card products enter the market or improve their rewards structure, card issuers also must reevaluate their rewards’ competitiveness to maintain current cardholders.
Personalized perks and bonuses
Card issuers extend 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, a company could attempt to snatch loyalty from other issuers by offering bonus spending opportunities in categories where you aren’t currently using their cards. (Of course, issuers would need to find the sweet spot that keeps you spending on their cards but doesn’t give away too many rewards)
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 brand or restaurant chain for elevated earning rates. Or card issuers could offer targeted challenges that let you earn rewards based on your spending and redemption activities.
Educate cardholders about card benefits
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 or redeeming for gift cards.
For most of my loved ones, knowing how to use their card’s perks and rewards keeps them loyal. They could earn more rewards by switching to another card or program, but they prefer to stay with the card and program they know. Card issuers could boost long-term loyalty by providing better education about a card’s benefits and rewards.
High-quality customer support
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. My parents won’t carry any Chase credit cards due to a poor experience many years ago.
As such, high-quality customer service is an underrated but critical element of long-term cardmember loyalty.
Loyalty is a difficult aspect for card issuers to master. After all, some cardmembers remain loyal to a card simply because it was their first card or they like the design. Meanwhile, other cardmembers chase welcome bonuses, low interest rates or 0% ARP offers.
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 cardmembers. I expect we’ll see card issuers laser-focused on increasing cardmember loyalty as they shift toward better personalization of offers and benefits.
Featured image by Westend61/Getty Images.
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