Points and miles can take you to exotic destinations, but a new survey has found that U.S. credit card holders tend to appreciate a more convenient prize: cash rewards.
The December 2021 survey of 2,764 U.S. adults was conducted in conjunction with the 2022 Bankrate Awards, and found that more than 4 in 10 U.S. adults (41%) rated cash back as their preferred feature. credit card.
The following most desired features didn’t even come close to the overwhelming popularity of Cash Back Rewards. Cash Back was three times as popular as the next favorite feature, wide acceptance.
After cash back, here are the most popular credit card features chosen by cardholders in the Bankrate survey:
- Accepted most seats (14 percent)
- Low interest rate (9%)
- Travel rewards (6%)
- Reduced fees (5%)
- Travel benefits (4 percent)
While travel rewards may offer more value to savvy people who know how to transfer and redeem points and miles, there’s a reason money is king, according to credit card expert Jason Steele. Cash back is convenient and can be used to pay for anything. Plus, it doesn’t require you to learn complicated rules or jump through hoops when trying to redeem rewards, Steele points out.
âIt’s easy: you select the credit card and get the cash back,â he says.
Younger generations benefit from a variety of credit card features
Cash back rewards have far exceeded all other features of credit cards among U.S. consumers of all generations, education levels, geographies and household incomes, according to the Bankrate survey.
The cash back rewards were more popular among the older generations and a little less popular among the younger ones. Here is a generational breakdown of the percentage of credit cardholders who chose cash back as the main feature of their credit card:
- Silent generation (77 years and over): 48%
- Boomers (58 to 76): 43%
- Generation X (42 to 57 years old): 45%
- Millennials (26 to 41): 40%
- Generation Z (18 to 25 years old): 25%
While cash back rewards were still number one with Gen Z, their choices for preferred credit card features were more diverse than older generations. Besides cash back rewards, four other features of credit cards were popular enough among Gen Z to reach double-digit numbers: with a card “accepted in most places” (14%), retail benefits such as extended warranties and purchase protection (10%), customer service including mobile app (10%) and low interest rate (10%).
This diversity of responses may be due to the fact that Gen Z tend to be more new to credit cards than members of many older generations who may have credit cards in their wallets for years or decades. explains Steele.
âIt’s new to them, so they may be more excited about the features and benefits,â he says. “Older generations can be more jaded.”
Debt Cardholders Choose Cash Back Over Low Interest
It may seem wise for credit card holders who carry a month-to-month balance to look for one valuable feature of the card: a low interest rate. But even balance carriers are opting for cash back, according to the survey.
How many Americans have credit card debt? Most American adults (83%) have at least one credit card, according to data from the Federal Reserve. And half (51%) of active credit card accounts have month-to-month balances, according to a November 2021 report from the American Bankers Association.
Among cardholders with a balance, cash back was more than twice as popular (30%) as a low interest rate (13%). In fact, the survey found that a large portion of card debtors (40%) don’t even know the interest rate of the primary card they owe money on.
But focusing on getting rewards while maintaining a balance is a costly mistake. First, the interest you pay on debt will negate your rewards many times over. The average credit card interest rate is over 16%. In contrast, the most generous cash back cards get you an overall return of just around 2%, according to senior industry analyst Bankrate, Ted Rossman.
âIf you keep a month-to-month balance, forget about rewards altogether,â says Nick Reyes, senior author of travel rewards site Frequent Miler. “There’s no way you can get past it.”
Many people stay with the same card for years
Credit card offers change regularly and card issuers frequently add perks and come up with new offers with tempting sign-up bonuses. Yet many Americans tend to use the same card for years.
According to the survey, almost half (49%) of cardholders have not changed their premium card in the past five years. Here is how these 49% are distributed:
- 26% have never changed their main card
- 12% last changed 5-10 years ago
- 11% last changed over ten years ago
A smaller segment of cardholders change cards regularly. One in five (21%) credit card users changed their primary card in the past year. And more than half of them (53%) say they change cards frequently. The rest said their recent change was the first time they’ve redeemed their primary credit card in some time.
Older consumers are more likely to keep looking for the same credit card for years to come. One in four (25%) baby boomers have always stayed with the same primary credit card, while almost one in three (31%) say it has been at least five years since they switched their primary card.
But it’s not just the baby boomers. The inertia of credit cards exists even among young consumers. More than one in four millennials (27%) have never traded their primary card, and 16% say it has been at least five years since they traded their cards.
âI’ve seen people pull out a card and proudly tell me that they’ve had the account for 20 years,â Reyes says. But these cardholders should consider that credit cards are always updated with new features and benefits. There are dozens of competing offers, many with no annual fee, anytime, Reyes adds. It never hurts to consider your options.
People who stay with the same card for years or decades “may miss out on hundreds or thousands of dollars in rewards and benefits over that time,” he says.
Is It Time To Apply For A New Credit Card?
It is a good idea to reassess your credit card needs and regularly review current card offers. Here are four tips for evaluating your credit card strategy and deciding if your current preferred card is still right for you:
- Make an annual review. Set an alert to remind you to check your primary credit card each year before your account anniversary, says Ben Watson, CPA and author at DollarSprout. If you’re paying an annual fee, make sure you’re still getting more than enough value from the benefits and features to offset the fees. Also consider your current lifestyle and consumption habits. âMake sure it’s worth continuing to use this card,â says Watson.
- I have a debt? Focus on the interest rate. Browse interest-free credit card offers to pay less interest and pay off debt faster. âIf you have credit card debt, signing up for a new card may give you an interest-free balance transfer for up to 21 months,â Rossman said.
- Get a big welcome bonus. Keep an eye out for great signup bonus offers. Look for one worth at least $ 200 to $ 300 in cash back or at least $ 1,000 in travel rewards, recommends Steele. There are plenty of offers to choose from: âOver the past few months we’ve seen some of the best signup bonuses ever,â says Rossman.
- Track your spending. Check your budget or credit card statement for the past few months to see where your money is going. With that in mind, you can maximize your cash back earnings (or travel rewards) with a card that offers the right categories of bonuses. For example, if you live in the city, rarely cook at home, and don’t own a car, you might want to look for a card that offers bonuses on restaurants and transportation rather than supermarkets and gasoline. âFind the card that offers rewards tailored to the spending you’re actually making,â says Steele.
Are you one of the many Americans who haven’t looked at the credit card offers available in years? It might be time to take a look. âIf you haven’t signed up for a new credit card in a while, you’re missing out on something,â says Rossman.