The Wallet wars — Round 4 — Features attractive to specific segments

Round 3 recap: Overall, credit card owners find "˜zero annual fees’ the most appealing credit card feature. While on average, some form of reward — reward points, bonus on purchases, cash back, and airline miles — is more appealing than low interest rates.

A credit card issuer would be interested in not only what is popular overall but also which features are most appealing to specific segments. For example, which features are attractive to loyal card holders or card holders who use their card frequently. A recent survey of credit card owners by Compete threw light on some such interesting trends.

Mirror mirror on the wall, who is the most valuable of them all?

(Refer to Chart 1 below) Credit card owners who find "˜no annual fees’ most appealing have owned their most frequently used card the longest. "˜Cash back’ also seems to appeal to more loyal card owners. Whereas the card holders who found "˜low interest rates’ most appealing were the least loyal. But do these card owners also use their card often and spend more using their credit card?

Loyalty of Customers by Most Appealing Credit Card Feature

There were some interesting trends that were revealed of high frequency users (as illustrated in Chart 2). Obviously, features that provide card holders benefit from higher usage – cash back, reward points, and miles – are popular among such holders. Interestingly though, of such features, airline miles was most appealing to more frequent users. This could reflect the fact that users need to spend a sufficient amount to get enough airline miles to get say a free flight ticket. Thus, more frequent users would select such cards. However, once someone has such a card, to ensure that they benefit from this feature of their card, they probably use the credit card more often than other credit card owners. Thus this may be a good feature for credit card issuers to attract high frequency users and also incentivize them to use the card more frequently.

Frequency of use by most appealing credit card feature

In fact, "˜airline miles’ are not just appealing to high frequency users but also to bigger spenders (as illustrated in Chart 3). "˜Cash back’ too is more popular among bigger spenders ($1K+). Medium frequency users and moderate spenders prefer "˜reward points’ on purchases. This too follows the same logic — with the "˜reward points’ feature one would benefit from spending more/more frequently using a credit card. However, moderate spenders would not gather enough miles through their purchases, so reward points are more useful to this segment. On the other end of the spectrum, in general, "˜low interest rates’ are most appealing to low spenders who use their card infrequently.

Amount spent by most appealing credit card feature

Using a credit card is one thing, but what about paying the credit card bill? Credit card issuers make money of card holders who do not always pay the entire bill, but eventually pay the amount with an interest added to it. At the same time, credit card issuers want to manage their risk with attracting enough card holders who typically pay their entire monthly bill. Do card owners who pay the entire bill find different card features more appealing than those who pay only the minimum balance? Chart 4 illustrates the differences in the preferences of these segments. Not surprisingly, low interest rate is much more appealing to segment that pays only minimum balance. No annual fee is slightly more appealing to the minimum paying segment than the full payment segment. While cash back, reward points, and miles on every purchase as well as bonus on specific purchases are more appealing to full payment segment. Thus credit card issuers can balance risk with rewards!

Credit card bill payment habit by most appealing credit card feature


  • Different features attract different segments. Depending on their strategic objectives, credit card issuers can attract the right segment by including and marketing the appropriate features
  1. No annual fee attracts highly loyal users
  2. Big spenders like cash back
  3. Airline miles can attract high frequency users as well as big spenders
  4. Minimum balance paying segment is most attracted to low interest rates and no annual fee
  5. Entire balance paying segment finds cash back, reward points, and miles on every purchase as well as bonus on specific purchases more appealing than the minimum balance paying segment

This is the fourth 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