MA MasterCard Incorporated

By AnnaMaria Andriotis and Amber Burton 

Credit card rewards have typically fallen into two buckets: aspirational (upgrading to a first-class flight, getting a free hotel stay) or practical (earning cash back). But what if you could cover the cost of a trip to space or pay down your student loan?

Visa Inc., Mastercard Inc. and big banks are revisiting their rewards programs to cater to younger customers who want to use their cards to build wealth or get out of debt -- not just rack up perks. Financial-technology, or fintech, upstarts are offering niche rewards to better compete against the established players.

Companies are also re-evaluating travel rewards programs. About 30% of rewards credit-card holders didn't redeem rewards in 2020, according to Bankrate, leading some issuers to believe there is a market for more innovative rewards. The pandemic's effects on travel and dining have only strengthened this push. One day, intrepid spenders could redeem hundreds of thousands of card points for a ticket to orbit, according to Visa.

Here are five reward offerings you're likely to see in the coming years, according to card industry executives and fintech firms.

Shrink Your Student Loans

With some 45 million Americans owing roughly $1.7 trillion in student-loan debt, more lenders are considering rewards programs that would allow cardholders to put cash back toward loan payments.

Fintech startup Social Finance Inc. in March launched a credit card that provides up to 2% cash back, which can be converted to pay down student loans that cardholders have with the company, among other things.

In the future, similar cards would be pitched to students graduating college and as a redemption option on existing cards, says Mladen Vladic, general manager of loyalty at Fidelity National Information Services Inc., which administers many banks' rewards programs.

Cover Your Rent

Another big expense for cardholders? Rent. Many landlords don't accept rent payments by credit card because of the fees charged by the card issuer and the payment network.

Visa and Mastercard are working on initiatives that they hope will increase card acceptance for rent payments, but in the past their efforts haven't gained much traction because of the fees.

Still, some companies are starting to offer rent-related perks. In the coming months, the fintech company Kairos plans to launch Bilt, a rewards program that lets consumers pay rent while generating points that could be used toward a down payment on a home, according to the company's website. Kairos declined to comment.

Invest in a Better World

Spend money, save the planet? More card issuers are looking into rewards programs that incentivize purchases with a smaller carbon footprint, as young people place a greater emphasis on the social impact of their financial decisions.

Aspiration Zero, a credit card launched in March, provides up to 1% cash back and says it plants a tree with each purchase. It also tracks the carbon footprint of the user's purchases and grades merchants on social issues, including whether they have diverse workforces or equitable labor practices. Customers get additional cash back when they shop at companies with higher scores. The Aspiration community has planted over 5 million trees in Central and South America, Madagascar, Kenya and the U.S., according to co-founder Andrei Cherny.

Synchrony Financial, the largest U.S. issuer of store credit cards, in April will allow customers who have its co-branded credit card geared at health and wellness expenses the option to redeem their points toward newly planted trees. The effort is part of a coalition that Mastercard launched last year along with card issuers and forest restoration groups to plant 100 million trees over five years.

Doconomy, a Swedish fintech company, recently launched its DO credit card in collaboration with Finnish bank Ålandsbanken, Mastercard and the United Nations Framework Convention on Climate Change. To promote personal responsibility for climate change, the card freezes the ability to make purchases when those purchases reach a carbon footprint limit for the month. The limit, which can't be overridden, is set based on data from S&P Global, UNFCCC and Our World in Data in collaboration with researchers from the University of Oxford measuring the carbon dioxide impact of every transaction. A corresponding app includes a carbon footprint calculator for purchases. Doconomy says it has also worked out how to assess intangible purchases such as medical expenses and haircuts.

For traditional rewards programs, card companies are also discussing offering rewards for eco-friendly card purchases, such as bike rentals and electric-vehicle charging, according to Visa.

Earn Crypto

More fintechs are launching cryptocurrency-related rewards programs.

BlockFi, an online lender for investors with crypto assets, says it will roll out a credit card with a bitcoin rewards program later this year. The card, which is set to have a $200 annual fee, will pay out 1.5% in cash back, which the company will convert to bitcoin, for every dollar spent.

Mobile payments startup Fold Inc. offers a Wheel of Fortune-style rewards program: Each time cardholders make a purchase with their Fold debit card, they get to spin a digital wheel to determine what rewards they get. Options include 1% or even 100% cash back that is converted to bitcoin and, in much rarer instances, a full bitcoin, worth around $59,000 on Friday.

Coinbase Global Inc., the largest U.S.-based cryptocurrency platform, plans to roll out a crypto rewards debit card in the U.S. that will pay 1% back in bitcoin or 4% in Stellar lumens, another cryptocurrency. Cardholders can make purchases with bitcoin or one of more than 50 other assets that Coinbase supports in the U.S. Coinbase converts the asset into U.S. dollars when it sends the payment to merchants, which with many assets involves a fee for the cardholder of 2.49% of the purchase price.

Level Up Your In-Game Purchases

Videogame developers are looking to roll out their own co-branded rewards cards that would let customers earn points through gaming and real-world purchases and redeem them for items within games, such as better weapons or cars, according to people familiar with the discussions.

Riot Games, which developed League of Legends, is looking to launch a credit card in the U.S. that doles out points that can be redeemed for in-game experiences, the people say.

Cardless Inc., a fintech firm that launched last year, is developing co-branded credit cards tied to sports teams that will reward users with perks like video chats with former players and discounted or free sports streaming services.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Amber Burton at Amber.Burton@wsj.com

(END) Dow Jones Newswires

April 03, 2021 05:44 ET (09:44 GMT)

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