Credit Card companies are being forced to innovate in the wake of the CARD act and it’s impending implementation.   While the doom and gloom scenarios painted by the banks are certainly not going to happen, one trend is starting to emerge.    Spending targets are becoming increasingly popular as card issuers are anticipating relying on swipe fees for a greater percentage of their income once many of their tricks and traps are outlawed.   Interestingly, several card companies are gravitating towards an annual spending reward based on the same exact amount.

What Is The Number?

Have you ever wondered why just about everything sold on TV seems to be $19.95.    The way it was once explained to me, that was a number most people felt comfortable parting with in return for the latest gadget or gizmo.     The magic number for credit cards seems to be $30,000.

For several years now, $30,000 in annual spending on your American Express Starwood card gave you Gold membership in the Starwood Preferred Guest program.    A nice reward, but nothing earthshaking.   Earlier this week, I mentioned the new Amex gold card, which gives you a 15,000 Membership Rewards points bonus when you spend $30,000 in a calendar year.  Now we hear that the Chase Bank/British Airways Visa is offering a free companion award ticket when you reach $30,000.     I would say a free, first class ticket on BA, potentially worth several hundred thousand miles, is quite a valuable reward.

What Does This Mean?

Credit card companies want you to consolidate your spending on their card.    For some reason, $30,000 seems like a great target.    It is probably pretty close to the annual expenses of a frequent business traveler.    I would say someone who travels every other week easily spends $1,200 on each trip and will have no problem hitting $30,000 in annual spend.   Likewise, a family with a household income between $75,000 and $100,000 a year should just about make it.     The trick, as any savvy reward card holder knows, is to use your card as a method of payment with any merchant who will take it.    For example, yesterday, I paid my water bill with a credit card.   It was only $15, but it beats the hassle of writing a check and mailing it.

What Other Trends Are Coming Your Way

Clearly, we are seeing across the board interest rate hikes, as has been covered extensively in the news.    For reward card holders, expect more creative rewards and spending thresholds.    I think most sign up bonuses will come after some amount of minimum spending, about $1,000 seems to be the consensus.    Other things to look for is increased offerings of intangible rewards.      I expect to see access to early purchases of hot new products granted to reward card holders.   That reward costs the sponsor nothing.      Look for reward cards that give you some kind of status in a club.    That club could give you cut in line privileges, special offers, or waived fees.    This would operate very much like airline, hotel, and rental car loyalty programs.    I don’t see any reason why a supermarket, department store, or car manufacturer couldn’t offer such a card.    These offerings could provide value to card holders and sponsors with little cost associated with the reward offered.

Another thing we will be seeing a lot of in the next year is experimental test offerings and random product withdrawals.   Three recent posts in the Consumerist highlight some of these offerings.    In one post, Citibank seems to employ some complicated interest rate rebate scheme.  In another, Bank of America decides to “test” annual fees on some cards.   In a third post, Citibank decides to close some random accounts for seemingly ingenuous reasons.

From the perspective of the banks, it is a whole new world out there.   They are just now starting to explore the market to see what it will bear.     As cardholders, we should not forget that the market works both ways.    If you have decent credit, you will have no problem getting a new card if your old card decides to include you in some weird “experiment”.   It is worth the effort to call and ask not to be included in this experiment before you cancel, but ultimately you should not loose any sleep over it.

Just remember, things are only just starting to get interesting in the Credit Card industry!

This entry was posted on Wednesday, October 21st, 2009 at 20:00 and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.