Credit card customers’ satisfaction with midsize card issuers has declined this year as borrowers have become frustrated with their inflexible rewards and subpar communication during the pandemic, according to a new report from JD Power.
Large card issuers, meanwhile, have received comparatively high marks, viewed by consumers as being responsive to their needs and quicker to adjust rewards programs to reflect changing behavior. Rather than offer large perks for air travel and hotel stays, for example, large banks pivoted during the pandemic to increase rewards for grocery shopping and dining out, said John Cabell, director of banking and payments intelligence at JD Power.
Cardholders at midsize issuers “didn’t feel like they were getting the same sort of responsiveness that they might be getting from national issuers, who were doing all they could to adjust reward programs and benefits,” said Cabell, who led the firm’s 2021 credit card satisfaction study.
The steep decline in the satisfaction with midsize card issuers dragged down the average customer satisfaction score in JD Power’s annual survey of credit card customers, from 811 in 2020 to 805 this year, based on a 1,000-point scale.
While national issuers ‘average score dropped by just one point from 2020, to 809, midsize issuers’ average dropped by 17 points year over year. That’s a big reversal from just a year ago, when midsize issuers had higher average scores.
Midsize issuers “tried to do their best to anticipate” borrower needs, Cabell said, but they were ultimately overwhelmed by the flood of customer requests and had long wait times.
It didn’t help either that, early in the pandemic, some lenders reduced credit limits at a time when many customers were strapped for cash or tightened their underwriting criteria for new applicants, Cabell added.
This diminishing satisfaction with credit cards could provide an opening to fintech lenders that are aggressively competing for traditional card customers by offering interest-free installment loans at the point of sale, according to JD Power.
One midsize card issuer that did rate high with consumers was Goldman Sachs, which issues the popular Apple Card. At 864, Goldman by far had the highest score of any midsize issuers. Three midsize companies tied for second: Huntington Bancshares, PNC Financial Services Group and BB&T, which merged with SunTrust Banks to form Truist Financial, but is still offering BB & T-branded cards.
Among national issuers, American Express ranked highest and was closely followed by Discover Financial Services. Capital One Financial ranked third in its group. The study included responses from nearly 28,000 credit card customers and covered September 2020 through June 2021.
Many national issuers tweaked their rewards programs as consumer needs shifted. American Express, for example, offered statement credits for cell phone bills. Discover Financial Services is letting cardholders redeem miles at gas stations and Chase Sapphire Reserve cardholders are receiving rewards points for Peloton home-exercise memberships. The Chase card is issued by JPMorgan Chase.
Wells Fargo has also launched a new card that offers customers 2% cash back on all purchases, billing it as a straightforward alternative to cards that only offer rewards for spending in certain categories. The card is similar to Citigroup’s Double Cash card.
The JD Power report also pointed to the “buy now, pay later” model as an emerging threat to credit cards. Newer lenders, such as Affirm, Afterpay and Klarna, have grown in popularity and billed installment loans as an easier-to-understand alternative to revolving credit. Some major credit card players have also introduced buy now, pay later options, letting borrowers finance large purchases on installment plans.
Nearly half of customers who used BNPL options said they would have used a credit card but did not want to tack on revolving debt and were swayed by lower or no-interest rate BNPL options, the report found.
“It’s hard to know exactly how those services are going to be regulated and play out in terms of popularity in the US,” Cabell said, “but we’ve seen in other markets [like Australia] that it can really compete with credit cards. “