- Key insights: Bank of America plans to relaunch its loyalty program, adding access to all account holders.
- What's at stake: American Express, JPMorganChase, Citi and others are also upgrading their rewards and other incentive marketing.
- Forward look: BofA sees the new program as a way to lure consumers early and retain them throughout their lives.
With large lenders making major bets on loyalty to woo cardholders, Bank of America is extending its incentive marketing program across income levels and products. BofA on May 27 will launch a new rewards program across bank and Merrill investing accounts, making at least some perks available to nearly all of the institution's customers.
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"Now anyone with a personal checking account can become a member of the program," Mary Hines Droesch, head of consumer and small-business products and analytics at Bank of America, told American Banker. The bank is updating its loyalty and rewards strategy amid lots of demand and competition from other financial institutions. Eighty percent of consumers have rewards credit cards, 94% value the convenience of cards overall and 91% appreciate the "value" of loyalty cards, according to a survey from the American Bankers Association.
What BofA is doing
Called BofA Rewards, the program will replace Preferred Rewards, which is open to consumers with more than $20,000 in deposits. The loyalty program does not have extra fees, an attempt to differentiate from premium cards, and has an annual benefit of between $150 and $4,000, depending on the tier. About 11 million consumers are in BofA's existing program and BofA estimates the expansion will increase the addressable market to 30 million bank customers.
The current Preferred Rewards customers will retain existing benefits for six months after the changeover on May 27, while the other new benefits go live on that date. BofA's strategy is to attract consumers at the low end while building more lucrative perks over time to keep those consumers from fleeing to Amex or other high-end lenders. The bank is also upgrading services at branches and expanding credit alternatives as part of its retention strategy.
"As you build more and grow in your financial lives you can move into higher tiers," Droesch said.
BofA's new entry "Member" tier for the program does not require a minimum deposit or investment balance and is available up to $30,000. This includes a credit card rewards bonus of 10%, a $100 discount on mortgage fees and a 0.1% auto loan discount. The "Preferred Plus" tier, from $30,000 to $100,000, includes a credit card rewards bonus of 25%, a mortgage fee discount of $300, a home equity line of credit discount of 0.25%, and an auto loan discount of 0.25% and free checking and savings accounts.
A "Preferred Honors" tier includes credit card rewards bonus of 50%, a mortgage fee discount of $600, a HELOC rate discount of 0.375%, an auto loan discount of 0.35%, free checking and savings accounts.
The top "Premier" tier, with more than $1 million in deposits, has a 75% credit card bonus and higher discounts to mortgages, HELOCs and auto loans.
"We're working across credit cards or banks, where most programs don't bring those together," Droesch said.
Premium battle
Other financial institutions are also investing more in loyalty programs. Citi's new cards include the Citi Strata Elite, a card designed to compete with premium cards from Amex, Capital One and Chase. And Chase recently refreshed its Sapphire card with new travel, fitness and experience perks, and higher fees. BofA's strategy with its new loyalty program is to make it simple by making it available across its spectrum of banking, wealth management and card products.
"Simple always wins when consumers are involved. Rules around deposit and loan amounts, account types, and other factors add complexity," David Shipper, a strategic advisor at Datos Insights, told American Banker. "Many customers will not put in the effort to understand the rules, or will not have enough deposits or other assets to reach the highest earn rates. This can result in disengagement and frustration with the program."
Amex is also among the large institutions updating its rewards program. Amex is in the midst of its "largest investment ever" in a card refresh, with new card rollouts starting in the fall of 2025. Amex regularly updates its card portfolio through a mix of card and site redesigns and either new or updated incentives. Amex's platinum card refresh also boosts the average fee to $895 from $695.
The focus on premium cards at Amex, Chase, Citi and Capital One puts pressure on banks to update their incentive and loyalty marketing.
"With respect to loyalty in the banking industry, it's not very competitive or compelling on its own, so I'm not surprised that Bank of America is revising the Preferred program to broaden its appeal," John Pedini, a loyalty analyst at Forrester, told American Banker. "Credit is where the arms race is in terms of exclusive benefits designed to drive acquisition."
