According to a new study by Mintel Comperemedia, new cash bonus offers for credit cards are up 23% this year over the 1% cash incentives that were available in 2007. These types of rewards are becoming commonplace, as competition heats up in the industry. Credit Land study also shows that 40% of cash-back credit cards offer a 1% reward as part of their loyalty program and 44% of cards offer cash-back with the first dollar charged.
According to Andrew Davidson, senior vice president of Mintel Comperemedia, “An additional cash incentive offered while applying for credit cards and usually triggered upon first purchase or once a cardholder spends a specific amount on the card, has been popular in the competitive cash back card segment. However, we are now seeing cash used as an additional incentive for some mileage cards, as well as cards without rewards.”
Incentives range from card to card. During the first four-month period of 2011, about 59% of incentives offered by credit card issuers were an incentive to encourage the consumer to submit an application. These incentives helped to increase the number of applications since consumers seemed to be staying away from opening new credit accounts or taking on additional debt. This figure is up 29% over the 30% of incentives that were offered during the first four months in 2007. While cash incentives are a popular option with credit card applicants and cardholders, so are bonus miles and points. During the first four months of 2011, 25% of incentives focused on bonus miles and points.
Some credit experts believe that it is the incentives causing consumers to apply for the credit cards in the first place. With these incentives, it also means there are no intentions in keeping or using the cards, beyond the terms and conditions required to earn the rewards. In the end, it may backfire on the credit card issuers because they’ll either lose the cardholders or have to keep offering incentives to make it interesting.