U.S. consumers have racked up the highest amount of credit card debt in history, but are still willing to pay more fees for reward programs that incentivize spending, according to a new customer satisfaction survey.
More than half of consumers who responded to a customer satisfaction study conducted by J.D. Power said they rollover credit card debt each month versus paying off their entire balance.
That number is an 11% increase from 2018 when 60% of respondents said they pay their full balance on a monthly basis, according to John Cabell, managing director for payments intelligence at J.D. Power, who co-authored the firm's report. Credit card interest rates have mostly remained flat during the same period, Cabell said.
After U.S. credit card debt
The J.D. Power study, which surveyed 30,000 consumers since last September, found that cardholders are most satisfied with offerings that provide attractive spending rewards.
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"This is an important time for issuers to respond to what appears to be a growing segment of card users that may need support," he said.
American Express was the highest-rated card issuer in the J.D. Power survey. Respondents gave Amex a 657 score out of a possible 1,000 points, while Bank of America and Discover tied for second at 629 and the issuer average totaled 609.
Even as credit card debt increases, consumers are most satisfied with paying an annual fee of at least $100 for card offerings that provide more attractive spending rewards, according to J.D. Power's survey.
BofA's Premium Rewards Elite credit card, which charges a $550 annual fee and offers spending rewards on travel and dining purchases, was the highest-rated offering overall and topped J.D. Power's chart for fee-based cards.
BofA's credit card received a score of 712, while the next three highest-rated cards are offered by Amex. The average score for fee-based cards was 611, with three offerings from Credit One Bank at the bottom of the ranking.
"The more you pay, the more you will demand that your card makes you happy," said Beverly Harzog, a credit card expert and consumer finance analyst for U.S. News & World Report.
Harzog pointed to card issuers increasing their offerings of "lifestyle rewards" during the pandemic to incentivize consumers to use their credit cards for everyday purchases on items such as groceries. Now, in a weakening economy, many of those consumers have run up card balances that are proving difficult to repay.
"While I do think that card issuers recognize some of the troubles that consumers are having paying their bills, they're also for-profit companies," she said. "As long as the consumer picks a credit card that matches their spending style, they're going to be able to earn a lot of rewards."
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Capital One's SavorOne Rewards Card was the highest-rated feeless card offering, but its consumer score of 666 was lower than BofA's Premier Rewards Elite. Respondents ranked the Discover Student Cash Back card second and AmEx's Blue Cash Everyday Card third.
Consumers scored credit cards that charge no annual fees but also provide no spending rewards at an average of 598, with Capital One's Platinum Secured Card ranking as the best offering with a 620 rating.
As consumer debt increases in a weakening economy, the value proposition of credit card offerings needs to improve, according to Robert Hammer, founder and CEO of the credit card consultancy R.K. Hammer.
While the most important factor that cardholders consider is the size of their line of credit, Hammer said that card issuers must also consider the "reasonableness" of annual fees and spending rewards.
"Sometimes you have to redo your thought process as an issuer, and that's what's going on," Hammer said in an interview. "There has to be continuous process improvement from the cardholder's point of view, not the banker's."
