About a year ago, I had a post that came to my mind and started writing it. I stopped shortly after starting it because it seemed really far fetched. But after the release of the absolute dud, Barclay Arrival Premier, I don’t think it is too crazy anymore. Could banks do the unthinkable and stop offering credit card bonuses?
Could Banks do the Unthinkable?
Now before you start telling me I’m absolutely crazy and there is no way this would happen, hear me out. If you were told few years ago airlines and hotels would be moving from award charts to dynamic redemptions, you’d probably laugh.
We have seen a few changes to why I think banks removing bonuses, as we know them, could be the future of credit cards.
There’s an inverse relationship between our credit card game and the economy. The better the economy, the worse for us. When the economy dips, we thrive.
As the economy improves banks have really tightened up and continue to do so.
Keeping Money with Banks:
If you take a look at Bank of America, their bonuses are mediocre at best.
Where Bank of America begins to get interesting is with their Preferred Reward Program. You receive a better credit card reward rate the more money you have with them.
Not only that, but it seems they making it harder for a credit card approval you if you don’t have a relationship with them. I’m just speaking from my most recent experience on this.
My USAA Limitless requires me to have a direct deposit of $1,000 or more per month to keep earning 2.5% cash back on all purchases. If not, I only earn 1.5% cash back. I do most of my banking with USAA, so this isn’t an issue. They reward me just a little bit more to bank with them vs someone who doesn’t.
Plus 2.5% cash back on all purchases makes this my non-bonus spend card. It’s just too good to not use.
Chase is even offering Ultimate Reward Points when take out a mortgage with Chase. The level of reward is based on the credit card you have with Chase.
Rewarded for Using Products:
Discover has used this method for a while now, where they will double your first year cash back, but no upfront bonus (or small amount through a personal referral).
The American Express Everyday Preferred and Everyday follow this idea. Use your card for a certain number of transactions and receive a bonus on your points earned. This makes it great for them and you.
Now add Barclay into the mix with their Arrival Premier. Although none of you should apply for that card, it’s just a bad card.
There is a reason for giving incentives on the back end…
Those incentives make you want to use those cards. If there isn’t an incentive you would just sock drawer it, right?
In addition, banks are really wanting to reward their “loyal” customers, not the ones who stop by for a bonus or two, then move on.
This seems to be a trend that banks are starting to incorporate. I think this type of structure will continue to grow as well.
While the Barclay Arrival Premier is a complete dud and I mean an absolute dud, I think it does offer insight to what the bank was thinking. They want to reward the customer who uses their product. I think this idea could be coming down the pipeline with other banks.
All these banks are looking to be your main squeeze, not your late night call. What Barclay is wanting to do is make this your top card by giving you extra points based on the your level of spending, without giving an upfront bonus.
Spend more, you are rewarded more than a person who spends less. Think of it as elite status for credit card earnings.
It’s smart on their part, but not what “we” want. We want the bonus upfront and not wait 365 days to get it. What if, a better card comes out? We have a tough decision to make.
Some Co-Branded Cards Offer This:
You see these “bonuses” with a few airline cards and even hotel cards where you earn a free night/companion ticket after spending “X amount” on their credit cards. But how many of you actually trying to reach those “bonuses?”
Sorry, but spending $30,000 on the British Airways card for a “free” companion ticket doesn’t really get me excited (especially with those taxes). That’s probably due to the fact my USAA Limitless earns 2.5%, which would be $750 in earnings and that’s plenty for a ticket across the pond.
I think we will see more of this practice in the future, but the offers will be improved so they’d be worth it. There are just too many people entering the game now for banks to keep these types of bonuses around.
We are seeing more “premium” credit cards hit the market. They often come with a large annual fee, some sort of airline/travel credit, and possibly status for having the card.
Let’s be honest, everyone now has Priority Pass Lounge access (myself included), TSA Precheck, or Global Entry.
You can even earn Hilton Diamond status for $450 a year. That seems far more enticing than the stay/night requirement from Hilton.
Some banks try to have some perk that is different than the others, but overall many are very much the same just a slight variation.
To help with these cost since we all want these benefits, this makes another possibility the bonus could be “enhanced.”
But Could it Actually Happen:
That’s the big question, right? The “Golden Age” of credit card churning seem to be behind us for now. With that in mind, I think it is completely possible.
All it takes is one bank to start a trend. Just like airlines are moving to dynamic awards, now hotels are following that trend.
I think Barclay could have started that trend. Lucky for us, Barclay gave many people no reason to actually apply for that card.
That isn’t to say someone like Chase, American Express, etc aren’t paying attention.
Citi has removed the bonuses on their Thank You Premier and Prestige in the past. I would say it has been fairly unsuccessful. That’s because we know they will bring it back. If they removed them, but replaced it with some sort of back end benefit, people might just bite.
Bonuses cost banks a lot of money and they want people to be using their cards more than once a year on a pack of gum to keep the card active.
This is why we will see the bonuses we know and love today, be replaced with back end spending bonuses. But, this isn’t necessarily bad for us.
Where it Would Happen First:
What I have found interesting, programs are devaluing their programs to a point where they are cannibalizing their own co-branded credit cards. There are very few reasons to put any real spending on co-branded credit card.
Outside of the sign up bonus and a few benefits, it’s getting harder to recommend a co-branded card. The earning rates aren’t appealing for co-branded credit cards.
Most people would do better with either a flexible currency card, or even cash back card. Personally, I only keep a couple of co-branded cards in my wallet just for the benefits. They never see the light of day outside of those.
My Hilton Ascend gives me Priority Pass Access, the US Bank FlexPerk gives me GoGo WiFi Access , and the airline cards I have give me priority boarding and a free checked bag. Some of these won’t even be renewed when the annual fee hits.
Banks could get to a point where they find buying the miles for co-branded credit cards, not worth the money. This would also help them push their own credit cards. Which are seeming to offer more value as airlines/hotels devalue their programs.
It Would Progress:
If the idea above were to be successful, then banks would eventually begin to change their own credit cards bonus structure.
The upfront bonus would be removed with more back end bonuses and keep those cards towards the front of your wallet. Those interchange fees add up for banks, and they want you to use those cards!
Removing bonuses to the back end would be a big change and mostly upset many. In the larger picture this could workout better year after year.
While I think the Barclay Arrival Premier is a dud, how many of you would now prefer to earn a back end bonus of Ultimate Reward Points for spending X amount, then receive it again the next year?
This would affect the new comers to the game and would alter credit card strategies of existing cards you already have.
The game is all about adapting and if these changes were to take place, we would need to adapt once again.
I think Barclay offering a back end bonus vs upfront bonus could potentially set off a new trend for credit card bonus structure. There are many new people to the game and banks want to reward customers who actually use their products.
It seems the days of churning are slowing down. They’ll be back at some point though.