Rewards, Lack of Fees Encourage Credit Card Use

March 31, 2010

Credit card holders are more likely to use cards that offer rewards and lack annual fees, according to a recent survey conducted by compete.

Rewards Result in Usage
Almost half of survey respondents (46%) cited some type of reward as the most appealing feature of the card they used most frequently. Reward points were the most popular form of reward (20%), followed by bonus on some expenses (9%), unlimited cash back and airline miles (7% each), and bonus for exclusive online shopping (3%).

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The most popular individual feature was no annual fee, cited by 31% of respondents. The only other feature to reach a double-digit response rate was low interest rate (12%).

Direct Monetary Benefits Important for Primary Card Users
Among multiple credit card holders who use one primary card, direct monetary benefits are more important than they are for multiple credit card holders who select a card based on rewards and features.

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Of those who use one primary card, 32% are incentivized by no annual fee, while another 15% use one primary card due to low interest rates and 13% use one primary card due to cash back. Nineteen percent of primary card users are incentivized by reward points, but much lower percentages use a primary card due to other rewards such as airline miles.

In contrast, 26% of multiple cardholders who select a card based on rewards and features do so because of reward points, the same percentage who do so because of no annual fee. Much lower percentages of cardholders in this group select a card due to features such as lower interest rates or cash back, and much higher percentages select a card due to other types of rewards.

Overall, zero annual fee is the most popular feature among credit card owners, while low interest rates does not garner as much interest as various rewards, like miles, bonus on purchases, or vanilla reward points per dollar spent.

Deals Spur Credit Card Usage
The average American holds 4.4 credit cards, according to other compete survey findings. However, they regularly use 1.9 of those cards, rarely use 1.6, and never use one. While a variety of reasons influence Americans’ decisions on which credit cards to use, specific deals such as double points for purchased made at certain merchants are the leading reason, influencing 36% of cardholders.

Another 29% of cardholders use one primary credit card and will use another if their primary is not functioning or does not get accepted. Interestingly, 18% of cardholders have no particular reason for favoring one credit card as compared to another.

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