Flat Cashback Rewards Cards Outshine Tiered Rewards in Cardholder Appeal

(New York, NY) Cardholders consider many factors when applying for a new credit card, with those offering no annual fees and attractive rewards structures being the most influential. Auriemma Group’s latest issue of Cardbeat US confirms that offering compelling rewards significantly impacts cardholder decisions, with a clear preference for flat cashback structures over tiered options. The simplicity and predictability of flat cashback resonates strongly with today’s applicants.

When presented with two rewards card structures of roughly equal cashback value, 48% of credit cardholders prefer the flat cashback structure, while 43% lean toward the tiered structure. Although this difference may seem modest, it widens significantly when it comes to application likelihood. 70% of cardholders say they are likely to apply for a flat cashback card, compared to 58% who would apply for a tiered rewards card, if offered by a trusted issuer. These findings highlight the competitive edge of straightforward earning structures.

Cardholders also have high expectations of their credit cards, often looking for value that goes beyond standard offerings. Auriemma’s research found that while a 2.5% flat cashback rate is not common and typically comes with various conditions, many cardholders perceive this level of return as being in line with today’s industry standards. This expectation underscores the challenge for issuers to balance generous rewards with sustainable program structures, especially as preferences vary by demographic.

For instance, issuers aiming to attract Gen Z may find that tiered rewards structures hold unique appeal. This cohort shows a slight preference for tiered rewards, suggesting they may appreciate the potential for optimized earnings that this model offers. By aligning rewards with Gen Z’s preferences, issuers may improve acquisition among younger cardholders.

“While there are reasons to gravitate toward one rewards product over another, flat rewards require little work and mental math on the part of the cardholder,” says Jaclyn Holmes, Director of Research at Auriemma Group. “This makes it the smart option for those who don’t want to give their credit cards much thought, enabling more seamless and stress-free spending experiences.”

Flat rewards structures also hold a distinct advantage in day-to-day usage, with 46% of rewards cardholders reporting that their most frequently used card offers flat cashback. This shows that ease and versatility may make flat cashback cards the popular choice across spending categories, contributing to top-of-wallet status.

Flat cashback cards provide an accessible, simple way to earn, appealing to mass consumers and driving spending across various merchants. Issuers may find that a straightforward rewards model fosters ongoing card usage, as cardholders don’t need to track changing categories to maximize their rewards.

“Flat rewards offer a win-win for both cardholders and issuers,” says Holmes. “Cardholders can enjoy the effortlessness of earning, while issuers benefit from increased acquisition and engagement. As the credit card landscape evolves, prioritizing simplicity in rewards can be a powerful differentiator.”