Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia
For years the lure of certain credit cards has been their tie ups with frequent flyer programs. While most of us don’t like credit, for some the risk/reward trade-off for the odd free return trip and/or upgrade to business class is worth it.
But what happens when literally overnight, your credit card’s frequent flyer points become temporarily worthless? As an Amex Velocity card holder, I was one of thousands of credit card holders in Australia that found themselves in that very situation after Virgin Australia went into voluntary administration. While their loyalty arm is separate to their core business, and isn’t in administration, redemptions have been frozen.
So I put in a call to Amex to find out what they would do for me. Largely speaking, it was nothing. No transfer of points to an alternative program, or refund of annual fee. Nada.
Many credit cards, like Amex have hitched their wagon to the travel industry. And while it’s almost a certainty that travel will resume at some point, will we really have an appetite to do it, like we did before?
Cashed up boomers who are most at risk of catching the virus won’t be too keen to jump on the next flight to coronavirus hotspots New York or London. Millennials staring down the barrel of unemployment will list travel last on their spending wish list (rent and food will be coming first for a while). Families struggling to pay mortgages and meet rising food costs won’t have fat in the budget for that annual Bali trip. All of this against a backdrop of mercurial border restrictions throws serious cold water on the travel industry.
And by extension, the credit card industry.
So where to next? Well, if credit cards are to survive, they need to find another reason to exist, and not put all their eggs in the travel basket. There is lots of opportunity here for fintechs that package up consumer rewards in other domains, to find a ready ear at the strategy workshops of the schemes.
When I went hunting for a new credit (yes, it’s time to kiss goodbye to the Amex), my first thought went to where the vast majority of my spend goes now – groceries. Next I thought of internet, my mobile plan spend, and then my electricity and gas.
Luxuries like travel aren’t that interesting in the new economy we’re entering into. What matters most is being able to pay the bills. The necessities. If someone can give me a credit card that allows me to do that for less, then maybe I’ll get sucked into the credit vortex again…
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