How To Beat The Credit-Card Companies At The Rewards Game (#GotBitcoin?)
The Points Guy, a rewards-card review site, enjoys a lucrative symbiotic relationship with banks. How To Beat The Credit-Card Companies At The Rewards Game (#GotBitcoin?)
A recent party in Manhattan had the trappings of a hot ticket, including a red carpet, a drag queen and a former “Real Housewives” star. But the 500-plus guests were celebrating something that doesn’t usually evoke glamour—credit cards.
The master of ceremonies: Brian Kelly, who not so long ago was a human resources employee and is now one of the most powerful people in credit cards. Mr. Kelly, who for a portion of the evening donned a jacket fringed with 100 fake plastic cards, is founder and CEO of The Points Guy, a website that reviews rewards cards.
Mr. Kelly, 36 years old, has the attention—and money—of some of the largest U.S. banks, including JPMorgan Chase JPM -3.02% & Co., Bank of America Corp. and Capital One Financial Corp. Reviews on The Points Guy, known as TPG, can make or break a card. Banks pay to advertise there and some seek his input before launching new products. The banks also pay TPG when its readers get their credit cards.
That has created a symbiotic relationship between Mr. Kelly and the banks. TPG’s financial success depends largely on the banks continuing to pay. The banks pay up because they are attracted to TPG’s large readership. More than 10 million people visited the site in January, and nearly half were first-time visitors, according to Mr. Kelly.
Complicating the relationship is the fact that rewards cards themselves haven’t been the moneymaker the banking industry was hoping for—and that is in part because of Mr. Kelly. TPG helped spawn a broader ecosystem of customers who swap tips online about how to game the system, wringing rewards out of cards before abandoning them, and some banks are discussing how to cut back on rewards to trim costs.
Still, banks keep competing for rewards customers. Banks spent an estimated $4.5 million in banner, display and video advertisements on TPG in the fourth quarter of 2018, double from a year prior and more than triple from two years prior, according to Mintel Comperemedia’s analysis of data from digital-marketing intelligence firm Pathmatics. Roughly three-quarters of that came from American Express Co. and JPMorgan, according to those industry estimates.
TPG ranked as one of the top five websites where banks spent most of their ad money for credit cards last year, alongside Facebook , YouTube and others, based on Pathmatics’ figures, said Pathmatics chief marketing officer William Merchan.
Mr. Kelly started TPG as a hobby in 2010, while working in HR at Morgan Stanley . He had credit-card debt and little savings, but had amassed hundreds of thousands of points on his corporate credit card that he was able to use for personal travel. Initially, he charged people $50 to help them book flights using their points.
In 2011, banks started paying TPG when readers visiting the website applied for and received cards.
His first big payday came that year. The JPMorgan British Airways credit card was offering 100,000 points to certain new cardholders. Mr. Kelly advised readers against redeeming the points with British Airways and to instead redeem them for travel on airlines where the points were worth more. Readers rushed to sign up for the card. About a month after posting stories about the card, Mr. Kelly said, he made more than $70,000—topping his annual salary at Morgan Stanley at the time.
Mr. Kelly sold TPG in 2012 for an undisclosed amount. It is now owned by Red Ventures and has about 60 full-time employees.
Mr. Kelly says none of the reviews TPG publishes are paid for by banks, airlines or hotels. He also says those companies don’t pay for his or his staff’s travel. When TPG buys ads on Facebook and Google—at times spending as much as $1 million a month—they are billed to Mr. Kelly’s business credit cards, and he says he uses the points he accrues to pay for his and employees’ travel.
Mr. Kelly is often on the phone and in meetings with employees from JPMorgan, AmEx, Capital One and Wells Fargo & Co., among others. Some banks consider his advice when they are preparing new cards or changes to existing rewards programs. For example, Mr. Kelly recommended for years that Capital One allow for airline transfer partners, where cardholders can use their points at a number of airlines. In November, after considering additional input from customers and others, Capital One announced the addition of such partners on some cards.
One of TPG’s biggest bank clients is JPMorgan. A turning point for the website came when it helped the bank launch its Sapphire Reserve card in 2016. Mr. Kelly recommended a live online Q&A session with a senior bank executive and other coverage. TPG earned millions of dollars from the card in the months after it was introduced, as droves of the website’s readers signed up for it.
Mr. Kelly’s Instagram account highlights a lifestyle of high-price travel that rewards cards can pay for, boasting photos of him in a hammock in Bora Bora and views of Cape Town from a luxury hotel.
His Manhattan awards party—which showered accolades on categories such as No-Fee Card of the Year and Best Hotel Loyalty Program—attracted guests such as figure skater Adam Rippon, Nobel Peace laureate Leymah Gbowee and pop star Bebe Rexha. For more than an hour, bank executives and their counterparts from hotel chains and airlines took to the stage to accept awards.
The price tag for the black-tie affair was about $1.5 million, according to a person familiar with the matter. TPG paid about $250,000, the person said.
The banks and hotels paid the rest.
Apple’s launching with a straightforward model it’s calling Daily Cash. Rather than arriving after your statement closes, as the name implies, Daily Cash will arrive in the form of Apple Cash after a transaction posts. You’ll earn 3% cash back on Apple purchases, 2% on all purchases made via Apple Pay and 1% cash back on physical card purchases.
Capital One Quietly Changed Some Of Its Credit-Card Rewards — Why You Should Care
It’s not an unusual move, and it exemplifies the pitfalls of some credit cards
For some Capital One credit-card holders, it’s gotten more expensive to turn rewards miles into gift cards.
At the end of March, Capital One quietly updated the number of rewards miles card holders need before they can trade them in for gift cards for certain popular retailers including Amazon, Apple and Walmart. The change applied to Capital One’s mile-based cards: Venture, VentureOne, Spark Miles and Spark Miles Select.
The change is a reminder that all consumers, not just Capital One card holders, should tread carefully when dealing with credit card points. Experts say it’s important to keep a few key factors in mind: point values can change at any time, consumers need to pay attention to what they’re using points for, and card holders should consider whether a cash-back card makes more sense.
Previously, a single mile earned with these Capital One cards equated to 1 cent for all gift cards — meaning that card holders would need to accrue 1,000 miles to cash out for a $10 gift card for any retailer. Now, the pricing for certain retailers has changed, making the gift cards more expensive to redeem. To get a $10 gift card from these retailers, it now costs 1,250 miles. In other words, a single mile is worth 0.8 cents when redeeming these cards.
The List Of Retailers Whose Gift Cards Are Now More Expensive On A Miles-Basis Include, Among Others:
Bed Bath & Beyond
The Cheesecake Factory
The Home Depot
Capital One did not announce the change widely. The company notified customers who had recently redeemed points for a gift card of the change in an email at the beginning of March, company spokeswoman Ceci King told MarketWatch. Capital One also posted a notice of the change on its rewards portal.
Credit-card companies are always flipping the script — and consumers usually lose out.
The fact that Capital One made a change like this somewhat abruptly — and with little fanfare — is not unusual, according to Matt Schulz, chief industry analyst at CompareCards.
“Card issuers tinker with their rewards all the time,” Schulz said. “For the most part those moves tend to make points less valuable.”
While current regulations require that credit-card issuers notify customers of “significant changes,” those rules don’t apply to rewards. And most card companies reserve the right to reconfigure their rewards programs in the terms and conditions consumers agree to when they sign up for the card.
Given the likelihood that changes will happen — and that they will reduce the value of points or miles earned — Schulz said consumers shouldn’t hoard points for very long. “They don’t tend to get more valuable over time, they tend to go in the other direction,” he said.
How Capital One’s cards compare when it comes to redeeming for gift cards
The industry standard is 1 cent per point or mile, as Capital One’s redemption rate used to be for all gift cards, said Ted Rossman, industry analyst with CreditCards.com.
But Capital One is far from alone in deviating from that. For instance, points are worth as little as 0.7 cents per point when redeeming for some gift cards through the Citi’s ThankYou rewards portal.
In other cases, points or miles can be worth more than 1 cent each under limited-time offers. Currently, a slew of $25 gift cards to retailers like Express and Belk only cost 2,250 points through Chase’s Ultimate Rewards portal. (That equates to 1.1 cents per point.)
Nevertheless, consumers will usually want to think twice before converting their credit-card rewards points or miles into gift cards.
“Gift cards generally aren’t the best thing to redeem points for,” Schulz said. “So many of these points programs are geared around travel, airlines and hotels. A lot of times that’s what works best.”
To that end, Capital One’s miles-based rewards programs clearly gear consumers toward using their accrued miles for travel-related purchases rather than things like gift cards. Each mile is worth 1 cent when used for the “travel eraser” feature, which helps cancel out past travel purchases, Rossman noted. Meanwhile, a mile is worth 0.5 cents when redeemed for cash back.
‘Gift cards generally aren’t the best thing to redeem points for.’
— Matt Schulz, chief industry analyst for CompareCards
“Capital One’s credit cards that earn miles are designed to be used for travel purchases or for transferring miles to airline partner,” King, the Capital One spokeswoman, said. “With this in mind, customers get the best value by redeeming for travel, however, the option for gift cards is still available to customers if they prefer that redemption option.”
Companies like Capital One, American Express and Chase also offer incentives from time to time that boost the value of rewards miles or points when used on travel even further, Rossman said. “If you know how to play the game and can be flexible with your travel plans, you could get 3, 4, 5 or perhaps even more cents per point or mile,” he said.
Getting the most value out of these points- or miles-based rewards programs involves a lot of math and homework on the consumer’s part though, Schulz warned. Consequently, consumers may want to think twice before signing up.
“The fact that points get devalued and tinkered with so often is a good reason why some people are better off with simple cash back cards,” Schulz said. “It’s simpler. It’s easier to understand. You don’t have to worry about the valuation.”
Credit Card Companies Are Bringing Back Huge Points Offers
Banks pulled back after the pandemic, fearful that they would have to eat a bunch of losses. Now they want to be ready when people start traveling again.
A 125,000-point sign-up bonus. Credits for Equinox personal training. An exclusive airport lounge with cold brew on tap.
The country’s largest banks are pulling out all the stops to lure customers to take on new credit cards again, after retreating from such deals during the Covid-19 pandemic.
Call it the return of the rewards war for credit cards: American Express Co. is dangling the 125,000 point-bonus — a $2,500 value that’s one of the largest ever offered — in front of some new applicants for its higher-end Platinum card. It’s also offering perks for virtual personal-training sessions through luxury gym chain Equinox.
JPMorgan Chase & Co. is now offering $120 in credits toward a Peloton Interactive Inc. membership. Capital One Financial Corp. is planning to open its first-ever airport lounge for certain cardholders this summer along with a 100,000-point bonus of its own.
A year ago, when the Covid-19 pandemic sent unemployment soaring, card issuers slashed incentives as they pulled back on signing up new customers, fearing people wouldn’t be able to pay their bills and forcing banks to swallow losses.
Instead, with an influx of cash from the government and payment moratoriums on student loans and other bills, people have been diligently paying their credit-card balances and setting aside more in savings.
The losses banks feared never materialized. Even delinquencies — a harbinger of future write-offs — remain near an all-time low.
Consumers are slowly starting to travel again and looking to accrue credit-card points, which are often used to buy flights or book hotels. People seem ready to plan big trips and get back on the road: Mastercard Inc., the country’s second largest payment network, said it has noticed spending with U.S. airlines double in recent weeks compared with levels at the beginning of the year.
At Synchrony Financial, the country’s largest issuer of store-branded credit cards, the firm opened 5 million new accounts in the first three months of the year, a 3% increase from the same period a year ago. It was the first uptick since the onset of the pandemic.
“What we’re really seeing is the consumer willingness to again look for credit,” Synchrony Chief Financial Officer Brian Wenzel said in an interview.
American consumers only have to check the mail to see evidence of banks’ renewed interest.
Card issuers mailed 257 million credit-card offers in March — down 14% compared with a year ago but up 23% from February. And it’s a far cry from the measly 57 million that were mailed during the depths of the pandemic in June.
“This year we’re certainly returning to a more normalized level of competition,” Roger Hochschild, chief executive officer of Discover Financial Services, said in an interview. “But we feel really good.”
Danny Funaro, a law student who lives in Brooklyn, said he’s seen more credit-card offers coming his way as he nears graduation. He ticks them off: Discover, Citigroup, JPMorgan.
Almost all of them come with some sort of sign-up bonus, typically valued at $300 or $500, he said.
“There’s some fine print that I never actually read about how to get that,” Funaro said.
“I’ve been getting them almost daily. It’s been pretty wild. It’s clearly trying to get people to get a credit card — and get a credit card now.”
Credit Cards Revive Rewards Battle With New Cash-Back Offerings
There’s a new battle brewing in the credit-card rewards war, this time over putting cash back in customers’ wallets.
Bank of America Corp. became the latest lender to debut a cash-back offering on Monday, when it unveiled its Unlimited Cash Rewards credit card, offering users 1.5% cash back on all purchases. That follows new products last month from rivals Wells Fargo & Co. and Citigroup Inc.
For years, lenders focused on developing credit cards offering points and miles that could be redeemed for flights or hotel stays. That spawned a cottage industry dedicated to helping consumers get the most out of their rewards.
Then the Covid-19 pandemic hit, giving credit-card customers little opportunity to travel or dine out and limiting their options for using points and miles. Many now want cash-back cards instead.
“We heard from our clients that they want earning rewards on their credit card to be uncomplicated,” Jason Gaughan, credit-card executive at Bank of America, said in a statement.
Wells Fargo kicked off the latest cash-back frenzy last month with the announcement of its Active Cash Card, which offers 2% back on all purchases. Citigroup followed suit days later with its Citi Custom Cash card, which gives customers 5% back on the category they spend the most on in a given month.
“We are investing in our home market,” Citigroup Chief Executive Officer Jane Fraser told analysts on a conference call last month, saying that the debut of the Custom Cash card was “well-received.”
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