Valentine’s Day has come and gone, but the weeklong “Loves Me” or “Loves Me Not” series on PYMNTS.com is just beginning. The fourth stop for the Market Platform Dynamics team is ‘Rewards’: loves me or loves me not?
Karen Webster: Loves Me
The card industry did a beautiful thing when it decided that it needed to layer in a set of incentives to create more of a reason for me to use one card over the others that I have in my wallet. Research says that it definitely works, too – rewards cause people to consolidate their spending on a card that offers a better set of rewards, and will even cause them to drop some cards altogether that don’t offer as good a deal. Traditional card-based rewards schemes come in a few flavors now too: points that accumulate when I buy stuff, and cash back that is a percentage of spend based on what I buy and what card I use. Some store cards, like my most favorite of all, Neiman Marcus, really, really have it nailed, though. They have a rewards program that multiplies the points I get based on how much I spend over the course of the year. So, serious fashionistas can get 5 points for every dollar spent, and on special days, sometimes as many as 15 points for dollar spent. At the end of the year, Neimans sends you a gift card with the dollars you have accumulated so that you can, well, shop some more at their store. Starting this year, they say they are going to send prepaid cards out periodically when points have accumulated so that people get those cards, shop with them, and spend more than the face value of the card! I’ve paid little attention to debit rewards, since the benefits seem quite low, which is a good thing, since they are likely to get blown up thanks to our friends Dodd, Frank and Durbin.
Frankly, no pun intended, I am a little worried that the whole rewards scene is likely to blow up completely since the economics to the card issuer are likely to be less compelling going forward than they are now and rumor has it that the CFPB is not all that keen on rewards since they say it pushes people into debt. I also wish that there were an easier and more relevant way for me to redeem rewards – who wants to save up a gazillion points to buy a rollaboard. Innovative plays like the ones that American Express are doing that allow me to redeem points to play Farmville and to buy some stuff online is a start, I suppose but wouldn’t it be nice if card issuers loved me enough to allow me to redeem points as cash at the point of sale. Maybe next Valentine’s Day.
Tim Attinger: Loves Me Not
Ok. To be honest, my relationship with rewards has been a bit of a love/ hate, and it’s been going on for years. Early on, when I was in my youth and the world was still covered in dew, the idea of actually getting a benefit —any benefit— for the spending I do every day was so enticing. I started off as a basic card-carrying consumer, with access to a credit line and not much else. But then, a funny thing happened. I joined a consulting firm, starting putting tons of travel expense on my card, and suddenly a bunch of card issuers who would never before even give me the time of day started sending me offers for new cards. These cards came with airline miles and hotel points, and they enticed me with promises of free flights to exotic places and plussed-up hotel suites for my leisure travel.
And I fell for these rewards programs. Hard. Very hard. I went all in. I dedicated my every spending dollar to these gorgeous young programs with their promises of a high-flying lifestyle. And my payments life became one of Champagne wishes and upgrades-to-business-class dreams. As with any relationship, the first few years of the relationship were a happy blur. A few trips across the country, and occasional free night’s stay, and I was in bliss. But then, as the years rolled on, the relationship got…complicated.
The free trips came less frequently. Those free nights in exotic locales almost disappeared altogether. And before I knew it, I was in a classic one-sided relationship. I was giving my card partner what she wanted right now —namely my payments business today– for the promise of great return someday in the future. And I realized that I didn’t really want to be giving all the time without getting back. So I said so. And with that a little bit of the sizzle came back into our relationship. She admitted that yes, things had gotten kind of out of whack. And the lavish gifts came back, in a new form. So what if all that love I’d been showing every day, with every transaction, could be used to buy DVDs, flat-panel televisions, magazine subscriptions, and tickets to concerts?
And, for a while, I fell all over again. Until I woke up one day and realized: these things are now getting just as hard to get as the fun travel. And what’s more, they were just another form of deferred love –rewarding for me tomorrow ( or, more like 6 months from now) for the love I show today. And I realized that this was never going to change. That the classic model of spend–> earn –> accumulate –> bank —> redeem that put the benefit so far away from the love I was showing right now was never going to stop.
So, I’ve started dating around. Oh sure, i still use my card every day. But there a others. And I’m not in love with my payment vehicle(s) and the old-school deferred-rewards model they give me. I’ve started looking for rewards love that is real, that gives back right here & right now. And I’ve found new relationships that help with where I am and who I am today. Discounts on things I’m about to buy. Access to events I covet. Rewards love now comes to me while I’m shopping, not after. And I’m just waiting, hoping, for one of these new age real rewards partners to offer me a payments relationship. Because I’d take it. I don’t love the old rewards model anymore. But I’m falling for the new rewards, because they’re real and right now. Don’t promise me a vacation, honey. Just help with the kids, take out the trash, and cook a meal now and then. That’s love I can feel.