Adapting Rewards Programs to New Lifestyle Trends: Q&A with Amalgamated Bank of Chicago
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Nearly every business segment has had to adjust significantly over the course of 2020, and the credit card industry is no exception. As we start off 2021, pandemic norms like working from home and traveling less will likely continue.
Pre-pandemic, Americans worked diligently to build up credit card points to enjoy rewards like travel and hotel accommodations. But with changes in priorities and shifting travel spending habits, credit card cash back reward programs need to adjust to better encapsulate Americans’ needs.
LendingTree turned to Andrew DeMotte, vice president of bankcard marketing at Amalgamated Bank of Chicago (ABOC) to get insight on the importance of adaptability.
Q: Are there future trends that you foresee in reward points within the credit card industry?
Andrew DeMotte: We have seen major changes over the past year in both what we buy and where we buy it. For example, consumers have been pushed to embrace e-commerce, as restrictions have tightened around brick-and-mortar retailers — and I think many will not go back after the pandemic ends.
The pandemic has also affected consumer needs — discretionary spending has shifted toward durable goods (electronics, home goods, etc.) and away from “experiential” purchases (travel, concerts, museums, etc.). It will be interesting to see whether spending patterns revert to their pre-pandemic ways (or perhaps even over-correct), or if these changes are permanent.
We as an industry need to keep an eye on these trends in order to remain relevant and serve our customers — for example, will a rigid co-branded card (with which you can only redeem bonus points at a specific retailer or travel provider) be as attractive as before, now that people are accustomed to more flexibility and convenience?
I think the is well-positioned for 2021 because we are offering the opportunity to earn at a high rate on goods and services that will represent a large part of our customers’ discretionary purchases throughout the year.
Q: Our latest survey uncovered that consumers are spending, on average, $359.08 on pandemic supplies, compared to $178.44 this past spring. How is ABOC addressing the different demands for goods with the program?
Andrew DeMotte: We are selecting categories for the 5x bonus program that align with the way consumers’ lifestyles and priorities have changed during the pandemic.
For early 2021, we will focus on offering bonuses for purchases intended for home use (groceries, wellness products, home improvement) and will shift later in the year to rewarding activities that consumers enjoyed before the pandemic — such as travel, entertainment and holiday celebrations.
Q: How do the demographics of cardholders differ now compared to when first launched?
Andrew DeMotte: The is geared toward a younger, more tech-savvy audience than our legacy union credit cards [ABOC’s older, more-established card offerings]. Most of our union cardmembers have been with us for 30-plus years; while we appreciate their loyalty, many are transitioning into retirement and have less need for credit.
Our new cardmembers tend to be younger (closer to their 30s or early 40s), and a surprising number are making big-ticket purchases right away — travel, home improvement, etc. — and appreciate earning the $150 statement credit that we offer as an incentive for spending $1,200 or more during the first 90 days.
Q: The offers a range of benefits to fair- and good-credit consumers that are typically reserved for only those with strong credit as of December 2020. What opportunities does extending this type of offer present that might not have existed in the credit card industry before?
Andrew DeMotte: It is relatively unusual for mid-tier cards to offer an introductory APR, competitive ongoing APR and a rewards program. We tend to be more generous and customer-friendly than comparable cards in our segment — for example, our 5x rotating quarterly program has a much broader selection of categories that qualify for bonus points, which will help our cardmembers get value from the card.
For example, you’ll see that from July through September 2020, we featured a “travel” theme that gave bonuses for almost every form of transportation (gas, car rental, cruises, airfare, etc.), lodging and entertainment — many of our competitors would select a much narrower set of categories (for example, only airlines or gas).
Q: Are there factors other than credit score that carry more weight in the card approval process for the ?
Andrew DeMotte: I can’t get into detail about our underwriting process, but I can tell you that we manually review every application before approving a new account. Because an actual person is reviewing applications, our approach is more about determining whether the applicant has demonstrated responsible use of credit, versus simply meeting a minimum credit score. If an applicant has a history of making on-time payments and not being over-reliant on credit (i.e. maintaining balances close to their limit), they could be approved even if their score is not considered “prime.”
For more information on how to maximize credit card rewards, consider finding your credit card issuer’s 2021 rewards calendar. Here is the 2021 calendar for reference.