Issuers are fine-tuning their rewards strategies, using carrots that can encourage fiscal responsibility and help them weed out less-desirable accounts.

While traditional rewards programs based on purchases are not going away, observers say that offering points and other perks based on cardholders’ behavior is a low-cost way to find the best customers, and will appeal to consumers who are trying to cut down on their spending.

Plus, with delinquencies and chargeoffs at near-record highs, bankers say that rewards, such as lower interest rates, for simply paying bills on time can help boost the bottom line.

“Rewards are not just going to be for spend, which they’ve traditionally been,” said Ted Landis, a senior executive in the financial services practice at the consulting firm Accenture. “They’re going to be leveraged against payment history, how much payment you put on principal, your adoption of additional products and then just your payments performance over a period of time.”

Some issuers already offer cards that incentivize responsible behavior from cardholders.

Citigroup Inc. in March 2009 debuted its Citi Forward Visa credit card that lets users cut their annual percentage rate by 0.25 percent if they make a purchase, pay at least their minimum amount due on time and stay under their credit limit for three consecutive months. The APR reduction is capped at 2 percent and cardholders also earn 100 ThankYou points, Citi’s rewards currency, every month they pay on time and stay under their credit limit.

Read the full American Banker article by Andrew Johnson


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