Credit card companies are ramping up their rewards offers — meaning that there’s never been a better time to maximize the cash and perks you’re getting.
“We’re seeing higher rewards than ever. Issuers are really eager to acquire new customers and hold on to their current ones,” says Matt Schulz, senior industry analyst at CreditCards.com.
The bonuses for new applicants can be eye-popping. In November, Chase permanently increased its introductory incentive to 50,000 points, awarded after new cardholders spend $4,000 in the first three months. This month, American Express started offering 100,000 bonus points on its Hilton HHonors Surpass Card for cardholders spending $3,000 in the first three months. The offer is its highest ever, according credit card expert The Points Guy, but expires on May 4.
The love is being spread beyond the highest-tier cards that target affluent travelers with perfect credit. Two secured credit cards — designed for Americans with poor or no credit — are offering cash rewards, an unprecedented move.
The Discover it Secured Card offers 2 percent cash back on gas and dining and 1 percent on everything else. SunTrust’s secured credit card is similar, giving 2 percent back on gas and groceries and 1 percent on all other purchases.
“These secured cards are meant to be a stepping stone for people starting or rebuilding their credit,” Schulz says. “So a rewards program is a nice perk to have for folks who are not top end of credit spectrum.”
This largess from credit card companies is, of course, self-serving. The banks are reeling from losses in other parts of their businesses, notes Bill McCracken, president and CEO at Synergistics Research Corp., which provides consumer marketing research.
In the last week, Bank of America, Wells Fargo, Citigroup and JPMorgan Chase all reported that their trading and investment-banking revenue got hammered in the first quarter. Their consumer lending business lines, which remained steady or increased, softened the blow.
“Banks have been under a lot of revenue pressure in other areas and credit cards are profitable,” McCracken says. “Consumers are improving financially and this has led issuers to be able to extend more credit to those who in the past weren’t capable of handling credit.”
For American Express, the story is slightly different. The issuer last year announced that Costco was replacing its co-branded American Express card with a Citigroup Visa version. At the time, AmEx said the Costco card represented one in 10 in its portfolio.
“That is having a big impact on AmEx,” says Karen Gordon, a spokeswoman for Zoot Enterprises, which provides credit decision solutions for financial institutions. “AmEx has actually begun targeting underbanked consumers and introduced products that will help them enter other markets because the competition for affluent customers is so high.”
Credit card issuers also face challenges from growing mobile and alternative payments businesses, like PayPal, which offer Americans a way to pay directly from their checking accounts or set one credit card as the default choice. To combat that, card companies are offering rewards and bonuses for using their cards in apps like Apple Pay and Uber.
“The goal here is to get consumers to set your card as the default for these applications on the assumption that consumers are unlikely to change these defaults down the road,” says Alex Johnson, director of credit advisory service at Mercator Advisory Group, a research firm focused on the payments industry.
Current cardholders may soon benefit from this increased competition. Schulz says he recently got a letter from his credit card company giving him a lower, promotional interest rate for the card he already had in his wallet.
“It’s a further indication of how competitive it is,” he says. “The conventional wisdom is that new customers get treated better than current ones, but banks are trying out new strategies to keep current cardholders happy.”
To get the best deals from credit cards, shop around using credit card comparison sites like CreditCards.com, ThePointsGuy.com and CardHub.com. These sites will have the latest sign-up bonus deals and can help you select a card that maximizes your spending patterns.
“It’s important for consumers to not jump at the first offer they get in the mail,” says McCracken, noting better ones may be out there. “It’s a very good time for consumers to get the most bang for their buck.”