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The current pandemic has altered our lifestyle and spending habits, especially since most of us are sheltering at home. And while a lot of folks and businesses are suffering right now, I think it’s also an opportunity for the credit card industry to innovate, pivot, and adapt to the changing environment. Innovative changes to credit cards during the recession will not only help consumers, but also the economic recovery.
These are tough times
First off, I know many of you are suffering financially right now. These are difficult times, and I empathize with your situation.
If there is anything that I can do to help you navigate your cards or points through this challenging time, please let me know. I’m happy to answer questions or provide recommendations for your situation.
We are already seeing the credit card issuers adjust their policies for a recession. In fact, many of the things that I predicted in our video/post seem to be taking shape. It appears that credit card issuers and banks are responding in a similar way to what happened during the Great Recession of 2008.
8 ways that credit card companies can make things better (while still being strategic)
I want to cover eight things that I think credit card companies should do now to not only support their customers but also position themselves for a post-pandemic economy.
I doubt the issuers are following my content. However, I can’t help to think about ways that businesses can evolve their models to better serve their customers and their own growth. It’s probably because I’ve been a management consultant for most of my working life.
1. Extend timeframes for minimum spending and other benefits:
American Express and Chase have already implemented this change, and I’m hoping other issuers follow their lead. Since most of us are spending less money, and also have fewer opportunities to meet large minimum spends, it would be great to see all issuers extending the timeframe. This gives consumers more time to use the card and reduces the risk of overspending just to meet the minimum spending.
If you’re struggling to meet your minimum spending and looking to extend it, I recommend calling the issuer and asking for an extension. Even if they say no, there’s no harm in asking for more time.
2. Widen qualified purchases for credits:
I’m looking at you, American Express, with your airline incidental credit! Some of these credits were already difficult to use. Now that travel is restricted, it’s even more difficult to find ways to use these credits.
My suggestion is to widen the type of purchases to include categories that are relevant right now and might even help local businesses. Modifying the categories to include things like food delivery orders or grocery deliveries would be a great move for consumers and our communities.
3. Offer additional credits for customer loyalty:
Many of us have held premium cards for years and are considering keeping these cards during this difficult period. Since the cost of acquiring a customer, especially a long-term customer, is quite high, it makes sense for the issuers and banks to incentivize customers to keep these cards, even with their high annual fees.
For example, Chase started to offer a $100 credit for Chase Sapphire Reserve cardmembers that had an annual fee that was due between April 1 and July 1. Also, there have been a lot of reports of other issuers providing generous retention offers when asked.
So, don’t be afraid to ask the issuers if you’re on the fence about paying the annual fee on your card. If you’re someone who has been a steady customer, you may be able to get an offer to stay.
4. Adjust rotating bonus calendars and processes:
Since our lives have been disrupted, I think it may be time to revisit the bonus calendars and adjust as necessary. Discover has already declared their bonus categories for 2020, and the categories for the second half of the year seem to be useful even with the shift in our lifestyle.
Chase also extended the streaming services bonus category into this quarter, which was a nice gesture since most of us are consuming more streaming content at home.
I also would love to see more customization with bonus categories, much like what’s available with the US Bank Cash+. This would help Chase too since they are often criticized for lacking a consistent grocery store category. How cool would it be if you could pick at least one custom category every month on your Chase Freedom card? That would strengthen the program.
5. Help retailers and customers move toward contactless and mobile payments:
Those of you who have traveled abroad know that the US is behind when it comes to payment technologies and processes. Most visitors to the US are shocked when their credit cards are taken away by a server and processed out of sight. In most other places in the world, the card transaction is processed at your table, and oftentimes, you can use a contactless or mobile payment method.
This would be a great time for contactless and mobile payment to gain traction within certain industries that resisted the change due to the cost. Restaurants and gas stations are two places that come to mind. Coincidentally, they also tend to be places where your card information is stolen.
Getting the entire industry to move toward contactless or mobile payments not only improves security for both the consumer and issuer but also reduces another point of physical exchange in this time of distancing and anxiety over infected surfaces.
6. Share data models:
The issuers and banks already collect a lot of data on where and when transactions are taking place. Why not use that data in aggregate to help consumers make more informed decisions on when and where to shop?
For example, how cool would it be if your phone warned you that your grocery store is busy right now based on the volume of transactions and suggested times when there may be fewer crowds?
That data could be helpful during these difficult times of physical distancing and potentially help to keep people safe. And if people feel safer, they are much more likely to spend and stimulate the economy.
7. Reduce fees and invest in small businesses:
Merchants have traditionally had to pay fees for credit card transactions. This is why you’ll often see retailers express a preference toward cash transactions. Though given that we’re trying to reduce the number of contact points for potential infection, it makes sense to get more people to use electronic transactions over cash, especially in the form of a contactless or mobile payment.
I think it would be helpful to reduce these fees for sellers to help reduce cash transactions. This is more of a long-term benefit, but I honestly believe it’s a change that can help shift our society toward less cash and more sanitary and safe transactions.
Also, we know that independent and mom-and-pop stores have been most affected by this economic downturn. Many of these stores rely on cash transactions since they lack the ability to invest in new systems or can’t afford to accept electronic payments due to the fees. This is an incredible opportunity for the card issuers to invest in these businesses and help them accept more payments through new terminals. Partnering with them would make this a reality.
8. Promote creative initiatives that improve local economies:
Our point and miles community is definitely influenced by promotions and bonuses. I would love to see the issuers use points bonuses to help influence positive changes, like offering bonuses for donations or even finding creative ways for us to use points toward redemptions that can be used at a future date.
For example, I recently came across a site called Buy Now, Stay Later. It’s a hotel bond initiative where you pay $100, and after 60 days, you get a $150 credit toward the hotel. You’re essentially helping the hotels maintain cash flow while getting the ability to redeem the credit at a later date.
I’d love to see similar initiatives, maybe even with points, where we could invest in our favorite hotel or destination to gain a return in the future that we could use once travel is restored.
Some of these ideas are a bit “pie in the sky.” Though these are tough times, and it’s going to require us to think differently and creatively about solutions.
And even if the credit card issuers aren’t going to capitalize on these opportunities, I’m hopeful that entrepreneurs will seize the chance to not only help our communities and businesses but also modernize our payment systems and behaviors.
What do you all think about these changes? What are other sustainable and creative ways that credit card companies could help this situation?
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