Study reveals credit card companies with the most loyal customers

Credit card issuers offer greater rewards
Posted at 8:48 AM, Apr 26, 2017

The credit card industry can be a cutthroat market. A constant barrage of offers entices consumers to leave their current card issuer for greater rewards, lower interest rates, or other targeted perks. Do these opportunities erode loyalty to individual credit card companies?

While many consumers, especially younger ones, think nothing of frequently changing their credit cards, a survey in 2016 found that 19% of survey respondents have had the same card for a minimum of 10 years. Another 15% of respondents had never changed their card at all.

Which card companies benefit the most from card loyalty? According to the recently released annual Brand Keys Customer Loyalty Engagement Index, two credit card companies tied atop the list for customer loyalty: the American Express Company and Discover Financial Services.

Brand Keys does not go into detail on their assessment methods, so it is not clear what raises these companies over competitors such as Capital One, JPMorgan Chase, Bank of America, and Citigroup (the next four on the list, in descending order). However, the results closely align with the 2016 annual J.D. Power Customer Satisfaction survey for credit card issuers. Discover barely edged out American Express for the top spot, with Capital One well behind in third place.

J.D. Power's survey examines six factors associated with the credit cards, listed from highest to lowest importance: customer interaction, credit card terms, billing and payment, rewards, benefits and services, and problem resolution. In short, winning cards offer the best combination of reasonable terms and rewards backed up by great customer service — and therefore, they likely earn loyalty from satisfied customers that trumps maximizing rewards or minimizing interest rates.

Discover is on a significant roll, with multiple wins in J.D. Power surveys in recent years. As a hook, Discover offers an attention-grabbing 5% cash back on up to $1,500 in purchases within rotating categories (as of this writing, the offer is on home improvement stores and wholesale clubs). R. Mark Graf, Discover's CFO, notes that the rate number is just part of their "overall value proposition" that includes easier redemption of rewards. For example, Discover was the trailblazer in allowing credit card customers to redeem points using the convenience of PayPal.

American Express is reaching the same heights through increased marketing efforts (with an almost 30% increase in quarterly marketing expenses in the fourth quarter of 2016) and attempts to differentiate their rewards from others. American Express CFO Jeffrey Campbell cited premium rewards like access to airport lounges and the First Bag Free program with Delta airlines as means to increase customer engagement.

Discover and American Express have reached the top of the loyalty list in different ways — Discover through convenience and American Express through differentiation — but it's likely that the underlying driver is a focus on customer service. No program is going to gain success if it is frustrating to use or if customers cannot easily resolve problems, and the J.D. Power results suggest that both companies are finding true success through old-fashioned customer care.

As in any industry, there will be some consumers that are driven entirely by rewards or by the lowest interest rate — and, from a pure economic standpoint, there is no reason not to switch cards when it is to your advantage. However, loyalty still matters. If you have a good relationship with your current card issuer, why not give them an opportunity to match any competitor's deal before you switch? You may find that they appreciate your loyalty just as much as you appreciate theirs. Of course, the higher your credit score, the better credit offers you'll get. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.

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