Banks want your loyalty, and increasingly they’re willing to pay for it. Bank of America announced this week that it will begin paying its credit cardholders a 10% bonus on rewards points when they combine their cards with a savings or checking account from the bank.
The announcement comes a week after Capital One said it will change its credit card rewards program so that only customers who keep their cards for a year or more will earn the maximum possible points.
The announcements fit into a broader trend of banks using various carrots and sticks to encourage consumer loyalty, says Gerri Detweiler, Credit.com’s personal finance expert.
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“From a bank’s perspective this makes a lot of sense, if they can get more revenue from the customers they already have,” Detweiler says.
The new version of BofA’s BankAmericard Cash Rewards Visa experiments with a two-tiered points system. Instead of getting 1% cash back on every purchase, consumers will get 2% back on purchases in grocery stores, and 3% on gasoline, according to a press release. The higher rewards rates are capped at $1,500 per quarter; beyond that, the rate falls back down to 1% for all purchases.
“We have developed a solution that sets us apart from the competition by giving customers more value in the spending categories that matter most to them,” Susan Faulkner, chief of consumer banking products for the bank, said in a press release.
At Capital One, the new Capital One Cash card gives cardholders 1% back on all their purchases. The extra rewards come into play over time. If customers spend $500 in the first three months, they get a one-time bonus of $100. After a year, cardholders can get a bonus equal to 50% of all the cash back they’ve earned over the previous 12 months, according to a press release.
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“This new card from Capital One offers terrific value to customers that are looking to earn more cash back in a simple way and without the complexities and restrictions commonly found in other cash reward cards,” Mike Wassmer, a Capital One executive, said in a press release.
Does either program make sense for you? That depends, Detweiler says. Before making a switch, you should compare the rewards you’re receiving now, and all the other offers for rewards programs you may receive form other banks. With the Bank of America program, you’ll also need to compare the terms of your checking and savings accounts compared with those offered by BofA.
“Don’t just take what’s offered. You have to do research on every product,” Detweiler says.
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