Bank-issued rewards credit cards face off against co-branded cards

Written by Maryalene LaPonsie
Posted On: April 11, 2014

American Express is a CardRatings.com advertiser.

The Mercator Advisory Group recently issued an interesting report that took a look at the use of rewards credit cards in America.

According to the research firm, co-branded rewards credit cards -- such as airline credit cards or gas cards -- tend to be preferred by consumers. What's more, the group discovered rewards cards in general may be losing some of their luster as fewer people, across all age groups, are participating in rewards programs.

Branded rewards cards get the nod from consumers

For consumers weighing their credit card options, the most interesting part of the study may be that people seem to prefer co-branded credit cards. That means they would rather have a card with a company name on the front rather than a more generic rewards card issued by a bank.

Apparently, people seem to think these co-branded cards offer more value than bank-issued rewards programs. In fact, the Mercator Advisory Group reports the allure of co-branded cards is so great some people who otherwise wouldn't have applied for a credit card at all are willing to sign up for a co-branded one.

Rewards participation on the decline

The study also finds people simply aren't using rewards credit cards as much as they have in the past. Perhaps surprisingly, participation in rewards programs is lowest among young adults. Only 57 percent of adults ages 18-34 with a credit card used a rewards program in 2013.

However, it isn't just young adults who are cooling to rewards programs. Participation dropped among all demographic groups from 2012 to 2013.

  • Overall participation in rewards programs: down 8 percent
  • Ages 18-34: down 8 percent
  • Ages 35-64: down 9 percent
  • Ages 65 and older: down 6 percent

The Mercator Advisory Group found 68 percent of all cardholders in 2013 used a rewards program. Participation was highest in the senior crowd, with 81 percent of those age 65 or older using rewards.

What it means for you

If you are in the market for a new credit card, the Mercator Advisory Group report offers some interesting food for thought.

When announcing the report, Mercator gave no hints as to why fewer people are participating in rewards programs. However, it may be possible some rewards programs are changing so they are not as attractive to consumers as they were previously. That's all the more reason for individuals to carefully review a number of rewards credit cards to ensure there are no unsavory details such as high annual fees or excessive restrictions on rewards redemptions.

In addition, although consumers may feel co-branded credit cards offer the best value, that may not always be the case. Bank-issued cards may offer more opportunities for rewards across multiple spending categories.

The bottom line is that if you are tempted to sign up for a credit card simply because of the brand, you would be wise to check out bank-issued cards as well. If you are going to be rewarded, you might as well as get the maximum benefits possible, right?

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