I’ll admit it: I am the credit card holder no financial institution wants.
I pay my credit card balances in full every month, so they’re not getting any money from me in interest or late fees. And last fall, I started a new hobby: Applying for credit cards with big sign-on bonus points programs, redeeming the points for travel and then canceling the cards.
It started with the Chase Sapphire Preferred card, which offered 50,000 bonus Ultimate Rewards points after spending $4,000 in the first three months. With that, my boyfriend and I scored three nights at the Cosmopolitan in Las Vegas in a suite overlooking the Strip.
Then I moved on to the Southwest Rapid Rewards card, also through Chase, which offers 50,000 bonus points after spending $2,000 in the first three months. And I just ordered Chase’s Marriott Rewards Premier card so I can rack up 80,000 bonus points after spending $3,000 in the first three months. With our combined bonus points from various cards, we’ll be vacationing in Cancun this July practically for free.
I’m not planning to totally screw over Chase, though. I really like the Southwest card and plan to keep it open, as the points will always come in handy for plane tickets.
There are a few downsides to becoming The Points Girl. First, it takes effort to work the points system. You have to determine whether you’ll meet the spending requirement in time to book the vacation you want, plus update your automatic payment information for everything from your cable bill to your food delivery apps each time you get a new card. Second, I’ve found I subconsciously spend more knowing I need to reach a certain amount in a three-month period. Third, when you have multiple cards open, you’re more likely to get hacked. I woke up one morning to a message from Chase’s fraud department asking if I had spent more than $1,000 on LA Clippers tickets (as a total non-sports person, that answer was a firm no), and had to get a new card. Finally, you have to deal with the awkwardness of getting on the phone to cancel the card once you’ve spent your points.
But these drawbacks are a small price to pay in exchange for sipping margaritas in Mexico courtesy of Chase, and the bottom line is, the programs hooked me enough to get me on board. The experience got me thinking about whether credit unions could (or should) do the same.
A credit card is not typically known as a credit union’s flagship product. And when they do promote a credit card, they like to focus on low rates. Bonus points programs are not unheard of in the industry, however – NerdWallet recently named the PenFed Premium Travel Rewards American Express card, which offers 20,000 bonus points after spending $2,500 in the first three months, as one of its best credit union credit cards of 2017.
I’m not surprised to see one of the largest credit unions offering a bonus points program nearly on par with Chase’s. But could smaller credit unions also get on board? And if not, what’s holding them back? To find out, I talked to two experts – CO-OP Financial Services Vice President of Credit Jennifer Kerry and Azigo, Inc. rewards expert Andrew Gates.
It turns out, they totally could, as there is no technical barrier to offering such a program, Kerry said. The question is, would the ROI be strong enough to make the offering worth it, and is the credit union willing to charge an annual fee for the card? In order to gain from offering a top-tier, perk-heavy credit card, institutions must examine how cardholders will use it over time and provide the appropriate credit limit, and that’s easy to get wrong, Gates said. And to help offset the cost of things like concierge services, these cards usually come with an annual fee – something that goes against many credit unions’ philosophies.
If a credit union decides rolling out a sign-on bonus points program similar to Chase’s isn’t the right move, there are other beneficial credit card program features it can focus on, according to Kerry and Gates:
- Create ongoing goals. Instead of offering one big bonus after meeting a spending goal within three months of account opening, offer bonuses for other actions that can be completed over time, like meeting a spending goal within a year or opening another account at the credit union, Gates suggested.
- Tier your cards. It’s fine to offer a card similar to the Chase Sapphire Preferred as your top-tier card, but be sure to offer lower-tier cards as well to meet all members’ needs and create a specialized rewards program for each. “Rewards that target different segments of your membership creates loyalty,” Kerry said.
- Promote balance transfers. Save members money by allowing them to transfer their balances over from a higher-rate card. But make sure the credit limit is high enough to cover the old card’s balance and everyday spending, Kerry pointed out.
- Bring in the community. Partner with local merchants when designing a credit card rewards program. “Credit unions may feel they can’t compete with big banks, but what they can do is highlight the fact that they’re the community financial institution,” Gates said. “It’s critical to their survival.”
My two cents? A rewards program that encourages the member to meet various goals over a long period of time, not just within a few months of opening the card, sounds like the way to go because it gives the member a reason to stick with the card for the long haul.
And by the way, Gates indicated those big sign-on bonus point programs like Chase’s will likely be phased out soon, as the banks are on to folks like me who are working the system. Oops. Guess I’ll have to enjoy it while I can. Now if you’ll excuse me, I’m going back to daydreaming about Cancun.
Natasha Chilingerian is managing editor for CU Times. She can be reached at nchilingerian@cutimes.com.
