As Travel Costs Take Flight, Credit Card Companies Should Keep Their Eyes on Everyday Cardholders

Americans are planning to travel less this summer, according to some news reports. But it’s not because travel is so expensive, although that is also true. For the most part, it’s because life has gotten so expensive. 

Card companies love to woo their wealthiest customers with ultraglam travel itineraries and extravagant dining experiences. Those customers will be fine. 

But there is an opportunity to be innovative when it comes to consumers who aren’t going to travel because they have to spend the money to get through the expenses of everyday life. 

The data is streaming out and compounding. American Airlines recently joined Delta and Southwest, reporting a slump in economy leisure class travel. 

As much as the spotlight is often on the wealthiest credit card customers, the reality is that it‘s the everyday mainstream user that drives a lot of business. 

According to the Consumer Financial Protection Bureau, the largest share of issuer profits comes from annual fees and interest income tied to mass market consumers. Struggling consumers also tend to carry a balance, and those interest payments add to profits. 

Let’s also not forget that each transaction, even small everyday transactions, is monetized through interchange fees. Keep these mainstream users spending, and the issuers keep earning. 

Right now, what those folks need is consistent support to help them get the things they need for everyday life. That does not include exotic travel. What it does include are things like groceries, gas, and maybe some local entertainment and casual dining. 

These consumers still want to feel rewarded for their loyalty. Instead of making consumers feel less-than because they aren’t able to get perks and rewards for travel related purchases, credit card companies would be wise to meet consumers where they are — in a tighter than they would like budget-driven life phase. 

One thing consumers don’t want is ultrahigh fees that are very common on travel cards. Credit card companies could consider setting up new tiers for those customers that allow them to take their membership level down a notch to avoid the highest fees, but still keep them in the fold. 

Instead of $695 for a basketful of aspirational perks, including airport lounges that are not going to be used, consider a $95 fee that comes with a credit for things consumers are buying anyway. 

Things like groceries at retailers like Walmart, Amazon or Target; or keep it simple with generous cash back rewards. 

These budget consumers may also grow into the most loyal consumers as they move through life phases. Gen Z for example is an attractive up and coming generation of credit card users who may not be big spenders yet, but are clearly showing interest in credit cards and financial wellness. 

Investing in them for the future comes at a very small cost and can be very rewarding in the long term for both parties. 

Consistency is key when it comes to spending on credit cards. If travel is taking a back seat to everyday needs, then card issuers can and should look at where consistent spending is focused. 

A consumer that isn’t going on their dream vacation is going to try really hard to keep doing the things they love at home. That means holding on to things like their Netflix subscription and their workout routines. They may not be eating out as much but they may treat themselves to more Door Dash and Uber Eats. 

For card issuers that might mean focusing on rewarding spending at streaming services, fitness-related apps and gym memberships, and food delivery apps. In other words, everyday treats and perks that take on a new appreciation and value for consumers who are worried about their personal present, and future, economic outlook. 

A travel rewards deal probably won’t get consumers to book that pricey trip if they are concerned about making ends meet. But supporting them and rewarding them for what they need to buy to maintain their lifestyle may be the secret to locking in this lucrative business segment. 

The travel spending slide is a wake-up call for the industry that there is an opportunity in keeping the everyday budget-strapped consumer happy.