press release

Facts Matter: CFPB’s Credit Card Rewards Report Misses the Forest for the Trees

Weston Loyd
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A new report released today from the Consumer Financial Protection Bureau (CFPB) once again mischaracterizes the highly competitive credit card market, specifically about rewards programs. In the latest installment of the Consumer Bankers Association’s (CBA) “Facts Matter” blog series, we respond directly to these false claims to correct the record. 

Key Findings 

  • With today’s release, the CFPB argues that credit card reward programs are complex and potentially confusing for consumers. In doing so, however, the CFPB focuses on only a segment of the credit card market and discounts the importance of consumer choice and competition.  
  • CFPB data shows that consumers choose from credit cards offered by approximately 4,000 different issuers. In doing so, consumers can choose cards offering a wide range of different reward options, from more complex mileage and point systems to the very simple (e.g., cash back). Consumers choose depending on their particular needs and preferences, and in the context of their overall portfolio of credit cards.
  • Indeed, the CFPB’s research reports clearly show that credit card issuers continue to fiercely compete on a transaction-by-transaction basis even after enrolling consumers. In order to be “top of wallet,” credit card issuers offer different types of rewards for different types of transactions. Further, consumers regularly exercise their ability to switch cards, transferring their balances from one card to another.

According to the CFPB’s most recent CARD Act Report, consumers choose from a wide array of reward cards.

The CFPB’s CARD Act Report clearly and simply explains, “rewards programs remain a key feature of credit cards, affecting consumer product choice and serving as a competitive battleground for issuers” (p. 98).

With approximately 4,000 issuers, today’s credit card market remains highly competitive, with issuers continuing to compete and innovate to attract and retain customers. 

According to both the CFPB’s last CARD Act Report and its most recent Issue Spotlight, issuers have been giving consumers more and more in rewards to win their business.  

  • As the CFPB’s recent report states, “the average value of rewards earned has also grown from 1.4 cents per dollar spent in 2019 to 1.6 cents in 2022, as issuers reported increased rewards spending to incentivize applications…” (p. 9).
  • The report also shows that in one month alone, issuers sent over 610 million marketing materials to consumers – with an average of over 438 million items per month in 2022. 

The increase in rewards and marketing expenses by issuers shows more competition, not less. In a market where rewards are highly salient to consumers, and consumers have more choices than ever, issuers will continue to compete by offering consumers better rewards, promotions, and innovations.

Consumers have never had more options to choose rewards that meet their particular needs – both complex and simple.

Across the approximately 4,000 competitors, credit card issuers offer a range of cards designed to meet the specific needs and preferences of consumers. Some consumers may not want to deal with complexity, particularly given other life stresses – that’s why we have cards that offer straightforward cash-back terms. Other consumers may be more open to points optimization and enjoy the challenge of finding the right combinations of points or ways to maximize their benefits.

  • Importantly, the CFPB’s research shows that consumers choose from a wide range of different types of rewards, from the more complex to the more simple. For instance, the CFPB’s most recent CARD Act Report found that nearly four out of every 10 dollars of rewards earned are from direct cash-back programs (p. 70).

Even after enrolling a consumer, card issuers compete fiercely to be top of wallet for each and every transaction.

Although the most recent CFPB CARD Act Report stopped including this average, CBA calculated using CFPB data that the average consumer has 3.8 credit cards. This means that, even after customers sign up for an issuer's card, the issuer must constantly compete to remain “top-of-wallet” for the consumer for each and every transaction.

A range of reward programs, from the more complex to the more simple, give consumers the option to uniquely tailor spending like: 

  • Higher cash back with certain merchants they shop at more frequently;
  • Travel-related rewards like lounge access, miles, early boarding, and free checked bags; and
  • Lifestyle and hobby perks like exclusive trips, dining reservations, and entertainment or event tickets.

Indeed, CFPB data shows that consumers can even go so far as to “fire” their current card issuers for better terms through balance transfers– and that cardholders regularly do so. 

  • Using data from the CFPB’s most recent CARD Act report, CBA found that cardholders transferred more than $50 billion in balances in 2022. For context, that’s greater than the balances held by all but the seven largest card issuers (see chart below).

By definition, this switching is being done by consumers carrying balances, indicating they are willing and able to move their balances when a better card is available. 

The Bottom Line 

In the press release accompanying today’s report by the CFPB, the Bureau alleges it has received a growing number of complaints on how rewards programs are administered. The CFPB does not share, however, these complaints only represent 4.5 percent of credit card complaints it has received. Indeed, this number is less than a tenth of one percent (0.09 percent) of the total complaints the Bureau received in 2023.

The CFPB zeroes in on particular trees in its search for a problem with the rewards card market but it should have taken the time to show the broader forest as well.

We encourage the Bureau to follow its actual data when prioritizing its efforts, writing its headlines, and shaping its policies.

CBA Advocacy 

  • Today’s report by the CFPB reiterates its prior concerns that consumers with revolving debts on average pay more than interest and fees than they get back in rewards. We address this in a prior Facts Matter blog, which can be found HERE.
  • To read CBA’s most recent blog post that highlights the robust competitiveness and unparalleled consumer choice in the credit card marketplace, click HERE
  • To read CBA President and CEO’s opening statement before the U.S. House Financial Services Committee at a hearing on the politicization of financial regulatory policy, click HERE.
  • To read CBA’s “Facts Matter” blog post series that corrects misinformation from the CFPB about credit cards and other bank products, click HERE.

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