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 Ã…landsbanken,
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)
Copyright (c) 2021 Dow Jones & Company, Inc.
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