To everything there is a season, or so the market shows via today’s rebounding economic environment. Anxieties around the pandemic have dipped, leading to changing consumer behaviors. In fact, U.S. retail sales grew 9.8 percent in March 2021—due in part to the latest round of stimulus—and Transunion predicts credit card origination volumes will jump 64 percent year-over-year by the end of the second quarter.
With these shifts, community banks have an opportunity to gain card-based market share by capitalizing on rewards programs in four ways:
Promote hospitality and travel rewards programs. As more people are vaccinated, all signs are pointing to an opening around travel. In fact, Deloitte’s “State of the Consumer: April 2021” emphasized a sharp increase in the number of people willing to take a flight or stay in a hotel. Consumers are turning back to tourism—just in time for summer—so card programs that earn them access to those services will fare well in the coming months.
Emphasize cash-back options. Though the economy’s picking up, consumers still have lingering concerns about their financial situations. According to Deloitte’s report, nearly half of respondents have anxiety due to financial stress. While credit cards are designed to support consumers in cash-constrained times, cash-back programs create an additional incentive. If a bank offers a cash-back rewards program, now is the time to emphasize its added value in the form of additional funds in the customer’s pockets.
Offer competitive annual percentage rates (APRs). With financial anxiety high, consumers are paying more attention to APRs. In fact, a recent survey reports that 64.6 percent of consumers are looking for lower interest rates over “best rewards” and “more cash back” when evaluating card options. Cards with both a competitive interest rate and a cash back or other kind of reward fare even better, so community banks want to consider these elements in their card portfolio and promotions.
Educate current card holders. On average, customers who fully understand their rewards programs spend up to $307 more per month than those who aren’t as familiar. As consumer spending rebounds, community banks stand to benefit by ensuring their customers recognize the added value of their rewards. Providing an educational communication that speaks to program specifics will help customers more thoroughly embrace it.
As the market rebounds from the pandemic, new shifts and changes will occur that banks will need to manage. Yet, community banks have an advantage: If they use credit card rewards programs to address their customers’ needs, they will increase customer confidence, strengthen their relationships, and drive subsequent card use.
For more on strategies to expand credit card use via rewards programs, download the white paper from ICBA Bancard & TCM Bank, “Cultivating the Strategic Value of Credit Card Rewards Programs.”
Damon Moorer is president and CEO of TCM Bank, N.A.