Spending Behaviour and Rewards Show Misalignment to Customer Needs
SYDNEY: 5 May 2020 — Many consumers in Australia are holding the wrong credit card for their individual situations, a fact compounded by increased financial hardship and altered spending behaviours as a result of the COVID-19 pandemic, according to the J.D. Power 2020 Australia Credit Card Satisfaction Study,SM released today.
With 42% of customers spending less since the pandemic—and using their card more often for transactions including household necessities and monthly bills—the result is that 27% of cardholders plan to acquire a different credit card. This is driven by respondents saying they’re holding a credit card that no longer meets their needs (16%) or they need more credit (11%).
Australia has a high percentage of cardholders (62%) paying an annual fee, yet only 34% say the value they receive from their card outweighs the annual fee they pay. Cardholders with higher annual fees are less satisfied and redeem rewards less often than lower-fee customers and are failing to take advantage of their superior card benefits.
“People are relying on their credit cards to help cashflow, which makes it even more important that they are suitably matched to the right cards,” said Bronwyn Gill, head of banking and payments intelligence at J.D. Power Australia. “While a strong mismatch was occurring before the pandemic, the change in spending habits is heightening this disconnect, affecting reward accumulation and perceived value. Cardholders are evaluating the existing cards they hold, and issuers need to ensure they are creating value for their customers to weather this storm.”
Following are some key findings of the 2020 study:
- Cardholders are facing increased financial hardship: Nearly one in five respondents (19%) say that since the pandemic began, they cannot make their minimum monthly credit card payment.
- COVID-19 has changed spending behaviour: While 42% of cardholders say they are spending less on their credit card, 27% indicate using their card for more household necessities. More than one-fourth (27%) are making more online purchases and 23% are using their card more often to pay household bills.
- Rewards and benefits redemption play significant role in perceived value: Cardholders who are receiving more value from their primary card compared with the annual fee paid are significantly more likely to use benefits (63%) compared with those card holders who say they have less value (49%).
- Majority of airline card holders are holding wrong card: Of the 14% of cards aligned with airline rewards, 63% of those cardholders have spending and usage habits that don’t align with card offerings. Airline cards will likely need to modify benefits/reward programs given the pandemic’s effect on the industry.
- Communication received digitally has highest positive influence: Only 38% of customers were contacted by their issuer in the past 12 months. Nearly three-fourths (71%) of communications are received digitally, and this method has the highest positive influence on overall satisfaction (+41 points).
Bendigo Bank ranks highest in customer satisfaction among credit card issuers in Australia, with an overall score of 772 (on a 1,000-point scale). American Express (743) ranks second and St. George (733) ranks third. The industry average is 719, a one-point increase from 2019.
The Australia Credit Card Satisfaction Study, now in its sixth year, measures overall satisfaction in six key factors: interaction; credit card terms; communications; rewards; benefits and services; and key moments. The study includes 20 major credit card issuers in the market, 15 of which are rank eligible. Scores are based on cardholders’ experiences with their primary card.
The study is based on responses from 4,808 credit cardholders and was fielded in February-March 2020. In addition to Australia, J.D. Power also conducts credit card studies across key financial markets including the United States, Canada and China.
J.D. Power is a global leader in consumer insights, advisory services and data and analytics. These capabilities enable J.D. Power to help its clients drive customer satisfaction, growth and profitability. Established in 1968, J.D. Power has offices serving North America, Asia Pacific and Europe.