Both Consumers and Merchants Benefit from Rewards Cards

Consumers obviously prefer rewards cards for the cash back, airline miles, hotel stays, or other rewards they accrue through their spending. Some recent data suggests that rewards cards benefit retailers as well by boosting the customer base and higher sales.

The data show that consumers who pay with cards tend to spend more than those who pay with cash, a phenomenon known as “ticket lift.” Debit and credit card transactions are two to four times larger than cash transactions. Likewise, when a merchant starts to accept cards, average transaction size usually jumps 10 to 15 percent.

The charts posted below demonstrate this phenomenon. The first chart shows the incremental cost of accepting rewards cards against the ticket lift associated with premium cards. Recreation has the highest ticket lift, with a 30 cent premium for acceptance, but nearly $40 in higher average transaction values. In drug stores—where the cost of acceptance is roughly 11 cents higher for premium cards—the ticket lift is $5.74.

The second chart shows ticket lift across card types, from non-rewards cards, standard rewards cards, and premium products. Overall, a premium cardholder spends 48 percent more per transaction than someone without a rewards card. For example a rewards customer spends $140 at a hardware store on an average visit compared to just $98 for a non-rewards card.

The data support the notion that the extra fees from premium cards appear to boost sales.