Marketing professors provide advice for credit card selection

Appalachian State University marketing professors Pia Albinsson and Neel Das were recently featured in WalletHub pieces, aiming to help consumers find the right fit for credit cards.

Dr. Albinsson was interviewed about Citibank credit cards.

Why would a credit card company offer 1% cash back on purchases and 1% cash back when cardholders pay the balances resulting from those purchases, rather than just 2% cash back at either point?
This is something new that I have not yet seen advertised myself. I think this is a great way to offer consumers an incentive to pay off their balances quicker. I think it makes the credit card company seem that they actually care about the financial well-being of their customers (of course lower overall APRs would communicate this even more).

What are the benefits and drawbacks of a credit card advertising “no late fees ever”?
I would sign up right away! The skeptic in me wonders, what are the fine prints in the terms of agreements? What is their definition of late fees? What are the penalties for the consumers? What other fees or costs do they have if balances are not paid? Does the APR increase at some point? This statement leaves me with more questions than answers I am afraid.

Citi now has the Costco credit card account, which used to be with American Express; what does that mean for the two companies as well as for consumers?
I am not familiar with Citi's cards and I am only familiar with one of American Express card that is affiliated with a hotel chain. I don't think that most consumers care what brand/logo their credit cards has unless they are tied to a specific bonus point system. Most people use credit cards and pay them off as they need and as their budget allows. Whether Citi or American Express is behind Costco's card probably doesn't matter to most people. If the card gives them discount or a better deal at Costco's that is probably what most people care about when signing up.

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Dr. Das was also interviewed about rewards cards.

Do you think the average person realizes how much is at stake when shopping for a credit card? (A new WalletHub study found that the best rewards credit card can yield over $1,000 more than the worst rewards card over the first two years.)
I do not believe that deciding to choose credit cards is a high involvement/effort decision for most consumers. Although it probably ought to due to the various incentives and avenues available for efficient credit management; however, given the other obligations I do not believe people are that concerned with credit cards. Most likely, credit cards are not positioned in the minds of the consumers as such where a bad decision is going to be that detrimental regarding an individual’s welfare.

60% of rewards credit cards prevent cardholders from redeeming until they've earned a certain minimum amount in rewards - why hasn't competition eliminated such practices over the years?
To my best belief this is simply a status quo position maintained by credit card companies. Although I do not have the data to confirm my beliefs, but I do not think that a majority of consumers are actively redeeming their awards across the different card brands. If they were, it would become a competitive position for cards to show how they are truly different in terms of what and how one can redeem. In other words, creating that feature as a truly competitive signal probably is not worthwhile for card companies and right now the current model is possibly bringing in more profits than if they were to change it and make it a point of difference.

What types of people would you recommend to seek out / avoid the 31% of rewards credit cards with earning rates that vary depending on amount spent or time period?
People who typically use certain cards for specific purchases – for instance, they might use one card for filling up at gas stations and another card for groceries and monthly utilities and the reason this is done is because each card rewards significantly more for the type of usage. Also, this might help consumers get an idea of their monthly outlay in terms of their expenses. I think reward cards are good for users that use their card this way; on the other hand, if there is a card that gives blanket rewards regardless of the purchase category, then one might go for that. However, the caveat in either case is that one should not be driven by the rewards to make a purchase. If credit card rewards are used for a purchase that one normally would NOT buy, then one should not go for a credit card with rewards.

Are you surprised that 74% of people think cash back is the best kind of credit card rewards?
I am not and that is because (as I mentioned above in my response to the first question) credit cards are low involvement. For a majority of consumers, credit cards are a functional product used simply for its utility. For a small group of people credit cards are status related (where even the look of the card is different from the usual run of the mill) – those individuals are, I believe, more aware of the nuances of different reward categories and might get a prestige card specialized on one or a couple of rewards.

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Published: May 23, 2019 10:49am