The Wallet wars — Round 3 — Preferred card features

Round 2 recap: An average American credit card holder owns 4.4 credit cards, of which only 2 cards are used frequently; the others are rarely or never used. Hence a credit card has to compete with other credit cards for share of wallet. While deciding which card to use for a purchase, there are primarily two groups of card owners: 1. Those who have a primary card that they regularly use (and use another card only if this primary card does not work); 2. Those who choose which card to use based on the rewards they would get for that particular card/purchase combination.

So how can credit card issuers ensure that their card is one of the frequently used cards? Are there different ways to reach or please these two different segments?

Show me the money!

Not surprisingly, reward for usage is an important factor. As illustrated in Chart 1, 47% of respondents cited some form of reward — reward points, bonus on purchases, cash back, and airline miles — as the most appealing feature of the card they used most frequently. Low interest rates, in comparison, ranked much lower on attractiveness with only 15% of respondents citing these as a factor. However, the single most popular factor was zero annual fees!

What is really interesting (as illustrated in Chart 2) is that among those cardholders who use one primary card, direct monetary benefits such as cash back, low interest rates and no annual fee, are much more important than for those cardholders who select a card to use based on rewards or features. This was especially interesting to me, in that for those who use one primary card, the key motivator is direct monetary benefits, i.e., such a cardholder is not necessarily using one card to maximize rewards, but for the monetary benefits such as cash back.


  • Overall zero annual fee is the most popular feature among credit card owners, while low interest rates does not garner as much interest as various rewards, like miles, bonus on purchases, or vanilla reward points per dollar spent
  • There are two main segments of card holders based on the card they choose to use most frequently. Each of these segments is attracted to different features of a card. Hence, depending on the segment an issuer is trying to attract, different features should be included in the card:
  1. Based on habit/have one primary card: Such card holders tend to be more attracted to direct monetary benefits such as zero fee, and cash back
  2. Based on rewards provided on the card for a particular card/purchase combination: Not surprisingly, such card holders find rewards most appealing

This is the third blog in a series of five blogs that Compete will publish on trends in the credit card industry during March-April. In April, Compete will also publish a whitepaper with more details on trends discussed in these blogs. To receive this complimentary whitepaper, please email your request to