Most consumers hold at least one rewards-based credit card and would consider paying an annual fee if it meant they would receive and earn more rewards, new research suggests.
New York-based Auriemma Consulting Group conducted the research through an online survey of 508 U.S. consumers in February.
About 61% of respondents said they would consider paying an annual fee for a rewards card, up dramatically from 8% who said so in August 2009, when Auriemma conducted a similar survey. Some 10% said they would not pay an annual fee, down from 68%.
“Consumer’s are now willing to consider paying annual fees when they believe the value they receive from the exchange is fair,” Scott Strumello, an associate with Auriemma, tells PaymentsSource.
Some cards once carried annual fees, but issuers later eliminated them because consumers balked, Strumello says. But “since August 2009, the presence of fees for rewards programs has become more prevalent,” he says.
Whether a card carries an annual fee, rewards-based credit cards still are popular, according to Auriemma’s findings. About 56% of respondents said they had at least one rewards-based credit card, up from 53% who said so in 2009. Some 44% of respondents did not have any rewards-based credit cards, down from 47%.
Lenders are continuing to promote rewards-based credit cards because the economics are favorable, especially for World MasterCard or Visa Signature cards, which have slightly higher interchange rates than do regular MasterCard or Visa cards, Strumello says, noting the difference can be “a few basis points.”
Moreover, consumers most likely to want a rewards-based credit card also are attractive to lenders because they usually have a higher income and are more credit-worthy than are consumers looking for lower rates, he adds.
Rewards-based credit card programs offer various types of redemption options, but most consumers prefer cards offering a cash-back incentive, according to Auriemma.
About 70% of survey respondents carried a cash-back rebate card, up from 66% who did in 2009, and 57% carried a points-based rewards card, up from 56%. Approximately 28% said they carried a credit card tied to earning airline miles. Auriemma did not ask about airline rewards in 2009.
“Cash-back cards are so popular because consumers receive cash, and who doesn’t want cash,” says Patricia Sahm, Auriemma managing director. A points-based card also may be limited to specific goods or services, she adds.
