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A New Look at the Rewards Credit Card Market in the COVID-19 Era

July 14, 2021

Rewards credit cards have long been a mainstay of the credit card market. In the beginning, rewards credit cardholders were thought to be mainly relegated to “transactors”– or those who spend on credit cards and receive rewards benefits but do not typically incur credit card debt – and particularly higher-income transactors. In past market views, transactors spent more on their rewards cards than “revolvers” – or those who do carry credit card debt. This of course stems from the fact that those carrying credit card debt don’t have the ability to spend as much as those not carrying debt.

Now, we have a completely different view of the rewards market in several respects – based on 8,900 online interviews of credit cardholders interviewed in the 2020 COVID-19 era. Phoenix Marketing International produced the research as part of its ongoing Credit Card Monitor platform.

Increased Importance of Rewards Credit Cards During the Pandemic – Especially Among Those Who Carry Debt on their Rewards Cards

Now, more than ever, rewards credit cards have taken on a greater role in managing a household’s financial affairs. The increased perception of importance is more evident among revolvers than it is among transactors. The study found that 60% of revolvers think that rewards credit cards are more important now than during pre-pandemic months – compared to only 32% among transactors.

For the First Time, the Gap Between Transactor and Revolver Spending Has Narrowed

During the pandemic, the spending level among Gen Z and Millennials earning less than $100K and carrying card debt have outpaced the spending level of their transactor counterparts. This is a reversal of past trends and is no doubt influenced by consumer-directed government spending. It remains to be seen whether this reversal will last or whether it reverts as we move further out into a post-pandemic world.


Rewards Card Activity Dominates the Credit Card Landscape Across All Income Levels

“Even among households earning less than $20,000 per year, 82% own a rewards card, and 90% of their spending dollars are charged to these cards”, says Greg Weed, Director of Card Performance Research at Phoenix. He adds, “the idea that rewards card owners do not generally carry balances is no longer the case; 93% of all revolving balance dollars are carried on rewards cards. Across all income brackets, most of the card debt is carried on rewards credit cards”.


Market Concentration Forces Have Helped Expand the Availability of Rewards Credit Cards

As with most industries, there is a concentration of market value; not all market segments contribute equally to total market value. The rewards credit card market is no exception. According to Weed, “Using self-reported consumer data, we see that 20% of rewards cardholders contribute 80% of total reported spending dollars. If we look at revolving balance and annual fee dollars, we see the same level of disproportionate market contribution. Since spending, balances (along with APR) and annual fees are some key components to the bulk of issuer revenue, it suggests that interchange, finance charge and annual fee value are delivered by a relatively small segment – comprised mostly of higher-income cardholders and younger cardholders under the age of 55.”

The effect of this concentration has enabled issuers to fund the expansion of rewards cards and benefits to a broader segment of income categories. In other words, higher-income cardholders tend to produce a sufficient level of value to issuers that can fund rewards credit card market growth.

About Phoenix Marketing International

Phoenix MI is one of the Top Research Firms in the U.S. (Top 50 Market Leaders Report) and is one of the fastest-growing Market Research firms in the world. Operating in all major industries, Phoenix utilizes modern technology, innovative research techniques, and customized approaches to help our clients elevate their brand, refine their communications, and optimize their customer experience. Founded in 1999, Phoenix has over 300 employees across nine offices in the US, as well as offices in Hamburg, Germany and London, UK. Learn more about how Phoenix can be put to work for your business at

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