Atlanta, GA, June 23--Credit-card issuers are turning to a new market--the home-improvement consumer--to promote their reward programs.
Traditionally limited to the gasoline and airline industries, reward programs are expanding to the home-improvement sector as card companies broaden the spectrum of products cardholders can buy to earn miles or points, or redeem with cash-back rebates.
Card issuers such as American Express Co. and Bank One Corp. have signed up home-goods companies such as Home Depot Inc. and Pier 1 Imports Inc. as partners in their credit loyalty programs, making them a shopping destination for consumers seeking to rack up or redeem reward points on their credit cards.
"We're involved in more (loyalty programs) today than we have been in the past," said Stacey Sutherland, who works in Home Depot's gift-card marketing department. "There's been a lot of talk about the trend of nesting, and that is pulling us in."
Credit-card reward programs have become more widespread as major card issuers race to make their own plastic stand out amid a proliferation of credit offers touting low rates and other benefits.
In the fourth quarter of 2002, 38 percent of mail solicitations sent for credit cards included cash-rebate or reward offers, up from 29 percent a year earlier, says Synovate, a Tarrytown, NY, credit-card research firm.
"There is not a card issuer that does not offer some type of reward component," said Christopher Keenan, director of marketing for Creative Solutions International, a Hockessin, Delaware, financial services consultant.
Keenan said the focus on home-related purchases reflects consumer demand and fuller awareness of the riches that can come from this niche, which has seen strong growth in recent years as low interest rates spurred record levels of home sales and mortgage refinancings.
"The market conditions are really prime for this target focus," Keenan said. "Even if interest rates do rise, there will still be a need for people to improve their existing homes."
Additionally, the success of private label credit cards offered at Target Corp., Lowe's Cos. and Home Depot suggest there is money to be made in the home market for issuers of general purpose credit cards.
For instance, industry data show that sales with Home Depot's credit card rose to 22 percent of the retailer's annual purchases last year, from 19 percent in 2000, Keenan said. Home Depot outsources its credit-card operations to Citigroup. American Express, which has sweetened some of the rewards tied to its credit cards, says that while cash is the preferred way to pay for home improvements, more consumers are taking advantage of credit-based cash-back or reward programs.
A survey conducted by the card company earlier this year of 341 consumers who were planning home improvements showed that 45 percent intended to use credit or charge cards to earn points for their purchases. About one-fourth of those surveyed said they would pick a home-improvement store based on whether it gives or accepts reward points and other purchase incentives.
"The points are really a form of currency," said Allyson Park, an Atlanta communications consultant who recently bought patio furniture from Home Depot after redeeming 50,000 points on her American Express card for $500 in Home Depot gift cards.
Park, who tries to pay all her bills with the charge card to earn reward points, said she plans to finance other home projects this way now that home-goods stores are partners in the American Express Membership Rewards program.
"We're selling our current home and moving into a two-bedroom, one bath that we're going to remodel," Park said. "We're going to be doing quite a bit of more home improvements."
