Credit Card Retention: If You Want Loyalty, Buy A Dog

4. June 2018.

Here’s an interesting spin on a topic we discuss frequently. You really can’t buy loyalty. You need to earn it and sustain the relationship. Here’s an interesting spin on how long you should keep an airline credit card. The author cites a study by ValuePenquin which shows the diminishing return a cardholder receives for airline credit cards. Similar to what Mercator showed July 2017 on the sustainability of reward cards, this article mentions:

  • One of the biggest findings: Airline credit cards have the most value in the first year.

  • Airline cards often come with big sign-up bonuses but, in subsequent years, the value falls off considerably.

  • The average sign-up bonus for the cards ValuePenguin analyzed was a whopping $400. Some cards on the higher end had bonuses worth much more.

To illustrate their point, the author projects a two-year net value for a single person and married couple; they show the American Express Platinum Sky miles card and the Citi AAdvantage Platinum Select World Mastercard Elite with a $1,014 benefit for Amex and a $1,148 gain for Citi.

  • To determine how much value single people and married couples could get out of the cards, ValuePenguin estimated how much they would spend each year on airfare, groceries, gas and restaurants, based on the Bureau of Labor Statistics’ Consumer Expenditure Survey. They then calculated how many points or miles each person would earn, based on that spending profile.

Here’s the punch. After year one, the cardholder loses the introductory bonus, some special features such as TSA Precheck, leaving only the standard bonus.

That is one of the big drivers of cardholder attrition, which we discuss in depth at this link.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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