"It's almost as though our members have started using their travel rewards as a vacation savings plan," explained one CU card executive who declined to speak for the record because she is not her CU's authorized spokesman. "They might not be able to finance a vacation this year out of their pockets, but they hope to be able to use their travel rewards to make some sort of trip."
The shift in credit union members' travel rewards behavior comes at a time when many big bank card issuers are cutting back on their card rewards programs or eliminating them completely.
One example is Citi's "Thank You Rewards" program, which added a $39 fee for all tickets redeemed through its CitiMiles program. American Express' Delta Sky Miles "Always Double Miles" program stopped doubling any of the miles, and the Hess Visa card's 10% introductory rebate for the first 90 days was scaled back to only 60 days and the 5% gas rebate was slashed to 3% as of April 1.
One move making news is American Express' offer of a $300 gift card to certain cardholders who agree to pay their balances in full by April 30 and close their accounts. Other issuers-including Discover, Bank of America and Capital One-have closed millions of inactive accounts over the past several months.
"This is a chance for credit unions to really make inroads with their members who are still in need of credit but are watching their relationships with bank cards either go away or otherwise lose their appeal," remarked John Pembroke, chief marketing officer for PSCU Financial Services. PSCU has about 275 of its processing partners using the CURewards program.
He also noted that the push for more rewards had led more credit unions to add rewards programs for their debit cards-albeit at a lower earning ratio than credit cards.
Pembroke said that PSCU had begun to track the increasing popularity of travel rewards and not just for airline tickets, but also for rental cars and hotel stays as well. This ties in with what other processing executives have noted as well-that cardholders are using their travel rewards points for shorter, more immediate trips rather than saving them for much bigger trips later.
"What we are seeing is the rise of the mini-vacation and the role travel rewards points are playing in those trips," commented Dennis Driscoll, vice president of loyalty services for Fidelity National Information Services. "What they are doing is maybe renting a car, driving to someplace not too far away that lets them have an experience away from home and their routine and they are often using their rewards points to pay for all or part of that."
"What we have noticed is that rental car certificates have become more popular," Driscoll said, "as well as other things like tickets for amusement parks and other amenities."
Mark Fenner, senior vice president for TNB Card Services, said his firm did not track its cardholder behavior in as much detail, but noted that recent data had reaffirmed that rewards gained in popularity since the economic downturn began.
"One of the things we are really seeing is that rewards programs are still driving spending. A card with a rewards program is still more likely to be a top-of-the-wallet card than a card without any rewards," Fenner added.
TNB has about 100 credit unions using its reward platform.
Driscoll said cardholders have shifted the value they place on rewards points for immediate travel. "I think our cardholders have gotten more sophisticated," he pointed out. They do the math and they can figure out that when a bank dilutes a rewards program to below a penny a point that it's not as good a deal as they have if they have one of our cards. We see increased use of gift cards and merchandise too, indicating that people are sensitive to the importance of brand and are using merchandise for gifts as well."
Dan Thompson, performance analyst for PEMCO Technologies, a processor for CU card programs based in Seattle, agreed that value of rewards programs and points has begun to hit home with credit union cardholders.
"We believe the ability of credit union cards to offer a real value difference when it comes to their rewards programs, particularly when compared to bank cards, is one of the key ways credit unions will differentiate themselves in the current market," Thompson said.