Credit Cards Watch Your Spending... Then Tailor Perks and Rewards to Match

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Here's a confession: Occasionally, when I'm really procrastinating, I go spelunking… in my credit card apps. I'm not talking about doing a cursory review of my Amex and Chase balances. I mean I go deep, clicking on all the little-used tabs, checking out my statements and scrolling through reward offers to see if there's anything new or different.

While this tour de apps turns up a lot of junk — a random 10% off coupon for Honey Baked Ham doesn't help me much — it's a great distraction. It's also useful because I occasionally stumble across a perk I've overlooked and could be using to my advantage. I'm familiar with popular incentives like rental car insurance, but I'm always excited to discover a diamond in the rough.

My latest expedition got me wondering about the most and least common credit card perks — and the methods lenders use to determine them.

How do companies decide which credit card perks to offer?

First, some context. In general, issuers offer financial incentives to customers to convince them to sign up for their credit cards and use them frequently.

Put very simply: Issuers take a cut of the transaction fees charged on each purchase. The more a person spends, the more money the company earns (and that's in addition to the revenue they get from interest, which obviously is greater on higher balances). So they want to both encourage use and inspire loyalty among their desired customer base.

To that end, Lora Monfared, head of consumer card products at Bank of America, tells me that companies design their rewards programs around factors like strategic partnerships, market trends and people's spending habits. They do a bunch of research "to ultimately help identify what might be most appealing for cardholders," she writes in an email.

For example, most major credit cards cover rental car insurance, which helps both "address frequent needs for travelers" and "improve the overall value of the card," Monfared says. As a result, it's a perk that's become standard across the industry.

Card issuers are always weighing the cost of providing a perk against the likelihood of acquiring and retaining customers, says credit card expert Jason Steele. This can change based on larger societal trends.

Monfared points out that a few years ago, Bank of America noticed an uptick in the number of people using their cards to pay for electric vehicle charging and streaming services, so it adjusted the perks on its Customized Cash Rewards card accordingly. Bank of America made it so EV charging qualifies under the "gas" category and cable, streaming, internet and phone transactions qualify under "online shopping."

"For us, it was important that we met both client and consumer demand by offering meaningful ways for cardholders to maximize everyday spending," Monfared says.

Other less-common perks she's seen recently include access to exclusive experiences, rewards on subscription services and credits for meal delivery or ride-sharing services.

Basically, if you can dream it, you can find a card out there with that perk.

(Side note: Steele says perks are slightly different than rewards. Rewards are typically kickbacks like cash back, miles and points, whereas perks tend to be benefits like rental car insurance, bag fee waivers and extended warranty coverage. I'm using the terms interchangeably here, but there is a distinction.)

Steele points out that the World of Hyatt card from Chase offers double points for gym memberships. The Mesa card gives one point per dollar spent on a cardholder's mortgage each month as long as they spend $1,000 on other stuff — plus three times the points on home and family expenses, including renovations, decor and daycare.

In my own research, I found that the Tractor Supply Credit Card lets you get 3% cash back on veterinary services. Other companies hook up cardholders with free museum visits or cell phone protection.

And Monfared says those offbeat offers from Honey Baked Ham and the National Hockey League store, which is giving me $20 back on a $100 purchase, aren't actually random at all.

"There’s a strategy behind it," she says. "Across the industry, these programs typically show up as card-linked offers that are shared with cardholders based on their spending habits and demographics."

The reason I don't see big-name household retailers in the mix as frequently as I see niche brands is that popular brands don't really need the exposure. On the other hand, Monfared says, smaller retailers relish the opportunity to be introduced to customers they might not otherwise get in front of.

Steele says the card issuer gets paid to act like an advertiser, the retailer gets to reach new audiences and the customer — me — gets a discount.

"Potentially, it's a win for all three parties," he adds. "But if you have no interest in the merchant, then the offer doesn't help you."

The bottom line

Credit card issuers want to give people a reason to reach for their card over others, so they look at factors like partnerships, trends, transaction data and customer preferences to come up with benefits to sweeten the deal.

Common perks include insurance, lounge access, bag fee waivers, purchase protection coverage and merchant credits. Rare ones include everything from free museum visits to discounts at super-specific retailers.

As banks seek new ways to add value, "that thought process can look a little different based on the product and clients who are using them," Monfared says.

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