Rewards Cards: How Your Customers and Their Issuers Benefit
Evidently, consumers are not alone in loving rewards cards; the card issuers are fond of them as well. To some people’s surprise, these rewards card programs are not just a perk of applying for and using certain kinds of credit cards – there are a few upsides for those who issue them.
The New York Times has recently reported that the benefits of rewards cards are not entirely for the consumer. Credit card issuers have found – through their relentless study of consumer statistics and spending habits – that cardholders put approximately 75 percent of their spending on a single rewards card, rather than spreading it among many credit cards. This should make sense to some of you merchants out there who handle and manage money on a daily basis. If there’s a perk out there, why not take advantage of it?
In fact, credit card issuers have found that while annual spending on a regular Visa card averages $5,200 per year, spending jumps to an average of $26,100 for a rewards card – nearly a five-fold increase in funds spent.
This type of spending concentration can be a gold mine for the credit card issuers who can attract and retain cardholders with reward programs. Even though rewards card customers tend to pay off their card balances more frequently than those without rewards, the interchange income alone is very profitable; “interchange” refers to the fees charged to merchants for accepting credit cards, and is split between Visa or MasterCard – and the issuing bank.
While it appears that low interest rates are the preferred advertising message for credit card issuers, it may be the rewards that are driving the most business and profits. Perhaps this is a classic example of a win/win situation for everyone involved. More spending benefits all parties (with the exception of those card carriers who accrue too much debt to easily pay off), especially you, the merchants, who are the facilitators of products and services purchases – chances are your profits increase vastly if you have customers browsing your store with a rewards card in their pockets. It’s also incentive to offer a rewards program of your own; proprietary rewards are equally enticing to your consumers, especially when they get a card that has the logo of their favorite shopping place on it.
Vision Payment Solutions is a comprehensive, full-service credit card-processing company dedicated to helping merchants just like you acquire and implement credit card – and rewards card – hardware, software, technical support, and more. Get in touch with us today to start processing your customers’ credit cards with a minimum of fuss and maximum return on investment.