With more credit cardholders modifying their spending behavior in pursuit of rewards, financial institutions now have an opportunity to capture more wallet-share.

"We see consumers playing the rewards game with credit cards, as they shift to using the credit card they perceive to offer the most valuable rewards. This year, that is increasingly a bank-issued credit card from their primary financial institution," stated Karen Augustine, manager of Primary Data Services at Mercator Advisory Group and author of the recently published report U.S. Consumers and Credit: Playing the Rewards Game, (Mercator, December 2017).

This comes at a time when nearly 3 in 4 general purpose credit or charge card users participate in a credit or charge card rewards program, especially high-income earners, according to Mercator's research.

That’s great news for financial institutions issuing credit cards, at least the ones with dynamic, creative rewards programs.

 "The key for issuers in this highly competitive marketplace is to develop strategies that increase customer satisfaction, which, in turn, decrease attrition and promote higher levels of credit card spend," Miller stated.

Here are a few tips for financial institution credit-card issuers:

Level the Playing Field with Transaction Data

Cardholders are becoming increasingly sophisticated in how and when they redeem rewards. Make sure you have the right data analytics tools in place to design rewards programs that capitalize on actual behavior.

Make Sure the Most Active Are Most Happy

Sure you want your rewards program to appeal to your entire cardholder base. However, do not alienate your most-profitable redeemers in favor of chasing cardholders who are more likely to sit on the sidelines.

Embrace the “Gaming” Phenomenon …

There are scores of popular reward blogs (i.e., "The Points Guy," "Frugal Travel Guy," "Mommy Points") and even more sites where cardholders can track programs, receive alerts, and learn techniques (i.e., "stacking," "churning"). Dive in and adopt the cardholder's "gaming" mindset to help facilitate such techniques, where it makes sense, to help increase usage, so everybody "wins," especially your institution.

… With the Understanding There Should Be No Losers: Calling it "The Rewards Game" minimizes the fact that you are dealing with real consumers who can just as easily bury your card in their wallets. Make your program as transparent as possible, communicate rules and rewards effectively, and minimize confusion so there are no hard feelings or sore losers.

Keep Your Head in the Game and Make Adjustments: From rotating special spending categories (i.e., greater cash-back rate for grocery shoppers this month), to introducing new digital features or exciting communications, constantly re-examine your rewards program to drive innovation.

Want to learn how you can add loyalty and rewards solutions to drive higher customer satisfaction and increase profitability in your credit portfolio? Request a free briefing with one of our Loyalty & Rewards Specialists.

* Source: "U.S. Consumers and Credit: Playing the Rewards Game," December 2017, Mercator Advisory Group