The Reason for Credit Card Benefits

by Jack Hojnar

A couple of years ago, while speaking at a conference in Washington, D.C., a panel consisting of credit card professionals discussed the topic of card benefits. I was lucky to be a speaker at the conference and had a front-row seat to the debate.

Both sides - for and against - presented obvious arguments. In support of benefits, one side believed benefits provide a relationship differentiator that can’t be generated from lower annual fees or lower interest rates.

The side against credit card benefits believed these insurance products to be expensive, underutilized items that affect the bottom line. This rationale is a position I've heard for more than 20 years in this business and one that surprises me everytime.

Benefits utilization - or more specifically, filing claims - has always confounded me as an argument against having benefits on credit cards. Many bank leaders beleive that a lack of claims implies a lack of benefit awareness or appreciation. To note, I have never utilized my homeowners insurance and yet find it difficult to cancel my policy because of lack of utilization or lack of appreciation; I have the policy in the event something happens I know I am protected.

Same is true of card benefits and the awareness of such is a responsibility of the financial institution.

As bank leaders in this industry contemplate the role that benefits play in developing a relationship with their cardholders, they should ask themselves simple questions:

  • How does awareness of benefits drive behavior?
  • What cardholders, based upon their value to the FI, should be given a more broad array of benefits?
  • Which benefits match best with the cardholder types of any particular portfolio?
  • How can I present benefits to my cardholders in a way that drives behavior?
  • What technology can we introduce that will allow any interactions with benefits to be easy and simple, especially if and when the cardholder needs to file a claim.

There needs to be a strategy behind the marketing and awareness-creation of insurance credit card benefits that provides protection for the cardholder while providing the financial institution with an enhanced customer relationship.

Insurance benefit products such as Cell Phone Insurance help both the customer and drive card usage for the issuing bank; it is one of the most popular products cbsi offers and marketing the product to cardholders can only help increase cardholder usage.

As 2021 moves away from the pandemic and travel begins to increase, travel-related insurance benefits will only serve to bring more revenue to financial institutions while providing cardholders with protection they most definitely need. Bringing awareness to travel-related benefits for bank cardholders won’t cause more flights to be delayed. Yet, when a flight is delayed and a bank’s cardholder is aware of the benefit, it’s highly likely the cardholder will continue to use that card.

Now, more than ever, card issuers need to find creative ways to promote benefits to their bank customers as a means to increase loyalty and create a better card relationship. It seems obvious - with Big Data and all the available technology - that creating an environment that both supports insurance products and provides customers with added value is within easy reach of every financial institution.

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