For affluent individuals and families, credit card rewards have become more than a perk—they’re a lifestyle enhancer. For many, these rewards offer an opportunity to unlock travel, dining, and exclusive experiences without straining budgets.
However, shifts in economic conditions and credit card issuers' strategies could make these programs less rewarding, presenting a potential challenge for wealth advisors managing client expectations.
Consider this: credit card rewards have evolved into a sophisticated ecosystem. They entice users with a compelling narrative—spend strategically and earn perks otherwise inaccessible. Some young professionals recount flying first-class or gaining access to elite airport lounges, all funded by their savvy use of rewards. Exclusive presales, such as tickets for Taylor Swift’s Eras tour through Capital One, or everyday cashback deals like 10% back at popular restaurants, have cemented the allure.
As wealth advisors know, high-net-worth individuals (HNWIs) often maximize these programs. They use them to subsidize luxury spending or accrue points for future use. However, as the economic landscape evolves, these programs may be entering a period of recalibration.
The Resilience of Credit Card Rewards – Until Now
Credit card rewards have flourished in an era of economic expansion and technological ease. During the pandemic downturn, credit card companies doubled down, offering bonus points on delivery services, statement credits, and pandemic-friendly perks to maintain user loyalty. These strategies helped sustain rewards programs through an unusual economic disruption.
Now, the landscape is shifting. As the economy faces traditional headwinds—a potential recession or tightening credit conditions—card issuers are adjusting. Annual fees for premium cards have climbed, while some rewards programs are scaling back benefits. For clients accustomed to these advantages, these changes may feel like an erosion of value.
Matt Schulz, LendingTree’s chief consumer finance analyst, notes that while rewards can be lucrative, they’re easier to manage during prosperous times. For individuals juggling multiple cards to optimize rewards, an economic downturn or unexpected financial emergency could expose vulnerabilities. For wealth advisors, this underscores the importance of encouraging responsible credit card use within an overall financial plan.
Credit Card Usage Trends: Implications for Client Portfolios
Credit card ownership in the U.S. has surged, with 82% of Americans holding at least one card in 2023, up from 76% in 2014. Meanwhile, total credit card debt reached $1.2 trillion by late 2024—a historic high. This growing reliance on credit cards for everyday purchases and larger expenditures reflects a fundamental shift in consumer behavior.
For HNWIs and affluent clients, credit cards often function as tools for financial optimization. Many utilize them to accrue points for essential purchases or to offset luxury travel costs. Others engage in "churning," opening new cards to capture sign-up bonuses before moving on. While this approach can generate significant rewards, it requires careful management to avoid fees, missed payments, or diminished credit scores.
Advisors should remain cognizant of these trends and their potential impact on cash flow and liquidity. For example, clients may be tempted to overspend to achieve rewards thresholds, inadvertently straining budgets or creating short-term financial gaps. Advisors can play a pivotal role in ensuring that rewards strategies align with broader financial goals.
The Emotional Appeal of Rewards
The allure of rewards isn’t just financial—it’s deeply psychological. An Ipsos poll from May 2024 revealed that 71% of Americans use rewards credit cards, with 80% expressing satisfaction with their benefits. Nearly 35% of these cardholders admitted they would reduce credit card usage if rewards disappeared, while an equal share reported spending more with cards than they would with cash or debit.
So Yeon Chun, a professor at INSEAD, highlights the emotional weight of rewards. For many, they symbolize a way to extract additional value from everyday life. However, Chun notes that rewards favor those who understand the system—those willing to play the game. For clients seeking to optimize benefits, this insight may present an opportunity for wealth advisors to guide strategic spending.
Preparing Clients for Potential Changes
As credit card rewards evolve, it’s crucial for wealth advisors to anticipate how these changes may impact client behavior and financial planning. Some considerations include:
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Fee Structures: Premium cards with annual fees exceeding $500 may no longer offer proportional value. Advisors can help clients evaluate whether their current cards still align with their lifestyle and spending patterns.
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Redemptions: Tightening restrictions on point redemptions for travel or luxury experiences could diminish the appeal of certain cards. Encourage clients to review terms and consider diversifying their rewards portfolio.
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Spending Behavior: For clients leveraging cards for rewards, ensure their strategies don’t lead to overspending or disrupt cash flow planning.
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Liquidity Management: Increased reliance on credit cards can lead to higher debt levels. Advisors can help clients prioritize timely payments to avoid interest charges and maintain financial flexibility.
The Role of Advisors in Navigating Rewards
Credit card rewards will likely remain a valuable tool for many clients, even as programs evolve. Wealth advisors are uniquely positioned to help clients maximize benefits while safeguarding against potential pitfalls. By integrating credit card strategies into holistic financial plans, advisors can ensure that rewards enhance, rather than undermine, long-term financial health.
For example, advisors might recommend allocating certain types of spending—such as travel or dining—across cards with category-specific bonuses. Additionally, educating clients about the true cost of rewards, including fees and opportunity costs, can foster more informed decision-making.
Conclusion
Credit card rewards have become a powerful motivator for consumer behavior, offering tangible and psychological benefits. However, as economic conditions shift, wealth advisors must remain vigilant, helping clients adapt to a potentially less generous rewards environment. By fostering disciplined credit card use and aligning rewards strategies with broader financial objectives, advisors can position clients to navigate this changing landscape effectively.
