A recent Bankrate survey sheds light on the behavior and preferences of American credit cardholders regarding rewards cards, providing significant insights into the redemption habits and favored features among U.S. adults. This study also highlights the impact of income and age on these behaviors, raising questions about why many cardholders might be missing out on valuable rewards benefits. The findings illustrate a compelling picture of underutilized opportunities and demographic disparities in the usage and ownership of rewards cards.
Underutilization of Rewards
A striking revelation from the survey is that a significant portion of American credit cardholders do not fully utilize their rewards, with nearly one in four rewards cardholders (23 percent) not redeeming any rewards in the past year. This underutilization is comparable to letting gift cards expire unused, effectively forfeiting free money and missing out on substantial benefits that could enhance their financial well-being. The reasons behind this underutilization vary, potentially including a lack of awareness about accumulated rewards or the cumbersome nature of the redemption process.
Some cardholders may find the process of redeeming rewards confusing or burdensome, while others might simply forget to redeem them, leading to unrealized benefits. The lack of understanding and engagement with their credit card rewards underscores a critical gap in the financial literacy of many cardholders. This is particularly unfortunate as rewards such as cash back can directly contribute to mitigating everyday expenses. Thus, addressing these barriers to rewards redemption is crucial for enabling cardholders to maximize their potential benefits and improve their financial management.
Popularity of Cash Back Rewards
Among the various types of rewards available, cash back emerges as the most popular choice among American credit cardholders. The survey reveals that 61 percent of rewards cardholders redeemed their rewards for either cash back or gift cards in the past year, significantly exceeding other options like free flights or hotel stays, which only 17 percent of cardholders chose. The preference for cash back is unsurprising given its straightforward and universally appealing nature, offering immediate value that can be used for everyday expenses or saved for future needs.
The popularity of cash back is further amplified during times of economic uncertainty, such as periods of inflation, where immediate financial benefits are particularly valued. Cardholders appreciate the simplicity and flexibility of cash back, which does not require intricate planning or specific usage scenarios, unlike travel rewards. This preference highlights a broader trend where consumers prioritize immediate and tangible rewards over potential long-term benefits that require more effort to realize. As such, cash back remains a compelling option that aligns well with the financial behaviors and needs of many Americans.
Demographic Influences on Rewards Card Ownership
The survey highlights a clear correlation between rewards card ownership and demographic factors such as income and age. Notably, 40 percent of Americans do not possess a rewards card, with ownership rates significantly influenced by income levels and age groups. For instance, 80 percent of individuals earning $80,000 or more annually have at least one rewards card, compared to only 44 percent among those earning less than $40,000. Similarly, ownership rates rise from 42 percent among Gen Zers to 70 percent among baby boomers, indicating higher awareness and utilization of rewards cards among older and more affluent demographics.
These findings suggest that higher income and older age groups are more likely to recognize and embrace the benefits offered by rewards cards. The reasons behind these disparities may include greater financial literacy, better access to rewards programs, and a more established credit history among more affluent and older individuals. Additionally, these demographics might have more disposable income and spending capacity that makes owning a rewards card more appealing and beneficial. Understanding these demographic influences is essential for financial institutions aiming to increase rewards card adoption and usage across different segments of the population.
Engagement in Redeeming Rewards
Engagement in redeeming rewards also varies significantly across different income levels and age groups. The survey indicates that 30 percent of individuals earning less than $40,000 annually did not redeem rewards in the past year. This percentage decreases to 22 percent among those earning $40,000 to $79,999 and further drops to 18 percent for those earning $80,000 or more. These findings suggest that higher income may provide more opportunities or a better understanding of how to optimize rewards cards. In contrast, lower-income individuals might lack the resources or knowledge to fully leverage their card benefits.
Older generations, who likely have more experience with credit and rewards cards, also show higher engagement in redeeming rewards compared to younger cardholders. This trend reflects both greater familiarity with the mechanics of rewards programs and possibly more strategic financial planning among older adults. Younger cardholders, such as Gen Zers and millennials, may benefit from targeted education on how to maximize their rewards, as their current lower engagement rates represent missed opportunities for financial gains. Overall, fostering greater awareness and understanding of rewards programs is key to enhancing engagement across all demographics.
Favored Features of Rewards Cards
When it comes to the specific features of rewards cards, cash back is overwhelmingly favored by American credit cardholders. The survey shows that 50 percent of rewards cardholders consider cash back to be the best feature of their cards. This preference far surpasses other features such as travel rewards points/miles and widespread card acceptance, each of which garner only 9 percent. Despite the higher potential value of travel rewards, their requirement for effort and precision in planning may deter some cardholders from prioritizing them.
Additionally, other features such as low interest rates (8 percent), low fees (5 percent), travel perks (4 percent), and customer service (3 percent) are less valued by cardholders. The simplicity and immediate value of cash back make it a top choice, especially in economic climates impacted by inflation where tangible financial benefits are highly appreciated. The compelling preference for cash back across various demographics underscores its adaptability and relevance in meeting the everyday needs of credit cardholders. This trend highlights an opportunity for financial institutions to tailor their rewards programs to align with consumer preferences more effectively.
Variations in Preferences by Age and Income
A recent study by Bankrate illuminates how American credit cardholders interact with rewards cards, offering valuable insights into their redemption habits and preferred features. This survey also examines how income and age influence these behaviors, thereby highlighting why numerous cardholders may not fully capitalize on their rewards. The results paint a vivid picture of missed opportunities and demographic differences in the use and ownership of rewards cards. There is an observable trend where younger cardholders and those with lower incomes are less likely to leverage rewards benefits effectively. In contrast, older adults and those with higher incomes tend to maximize their card benefits more proficiently. This disparity raises important questions about the accessibility and awareness of rewards programs across different demographic groups. By understanding these dynamics, card issuers can better tailor their offerings and educational efforts to ensure more equitable use of rewards cards, providing greater value to a broader audience.
