As we brace for a potential recession, the future of credit card rewards and points programs hangs in the balance. How will these perks evolve in an economic downturn? That was the super interesting question that I recently discussed with Juliana Kaplan from Business Insider.

From an international payments systems perspective, credit card rewards programmes have long been a strategic tool for issuers to drive customer acquisition and retention. According to Statista (2022), the US Consumer Payments Study of 2018, revealed that 80 per cent of the respondents preferred cash rebates as the most preferred type of credit card rewards program in the United States. This was followed by gift cards, merchandise, travel and experiences, in that order of preference. However, as we approach a period of heightened economic uncertainty and potential recession, the sustainability and structure of these schemes may come under pressure.

Historically, as shown in the work by Murthi et al. (2011), while rewards and affinity cards can attract lower-risk customers, they do not necessarily translate into greater profitability. In fact, such customers often have shorter lifespans with the issuer and may generate lower returns. In the Indian context, as Liu et al. (2012) found, low levels of consumer engagement in rewards programmes further dilute their effectiveness in fostering loyalty. Crucially, it is not the existence of a rewards programme that matters most, but the extent to which consumers are actively involved—particularly in redemption behaviours.

Against this backdrop, the latest data from the Federal Reserve (February 2025) shows a notable uptick in credit card delinquency rates, with a sharp rise among lower-income and subprime borrowers. This is particularly significant because many credit card rewards schemes are funded indirectly through interchange fees and the interest paid by revolvers—those who carry balances. If delinquency rates continue to climb, this revenue model becomes less reliable.

Source: Barnes et al. (2025)

In a downturn, we can expect issuers to re-evaluate the cost-effectiveness of rewards schemes. We may see a shift towards more targeted, tiered, or usage-based incentives, potentially favouring higher-income or low-risk customers who are more likely to repay in full. There could also be greater integration of alternative loyalty mechanisms—such as cashback for essential spending or partnerships with digital platforms—that provide more immediate value to consumers under financial stress.

At the same time, the competitive landscape for consumer credit is evolving rapidly. One growing threat to traditional credit card spending—particularly during a recession—is the rise of fintech platforms offering Buy Now, Pay Later (BNPL) services. These alternatives are often marketed as more transparent and flexible than revolving credit, and they appeal strongly to younger consumers who are wary of interest-bearing debt. As BNPL adoption increases, especially in sectors like e-commerce and travel, issuers may see a decline in transaction volume—a key lever for funding rewards through interchange fees. This shift could further challenge the viability of expansive rewards programmes, especially if economic headwinds lead consumers to favour lower-risk, short-term credit arrangements over conventional card use.

Furthermore, central banks and regulators may increase scrutiny of opaque reward structures, particularly if they contribute to household over-indebtedness. In Latin America, for example, we are already seeing efforts to rebalance financial inclusion with responsible lending, and this may inspire similar policy shifts in other markets.

In short, while rewards programmes are unlikely to disappear, their structure and accessibility may change considerably in a downturn. Their future will depend on how effectively they align with risk management priorities and changing consumer needs in a more fragile economic environment.

References

Barnes, K., Bopst, C., & Driscoll, J. (2025, February 28). Predicting credit card delinquency rates. Federal Reserve Board. https://www.federalreserve.gov/econres/notes/feds-notes/predicting-credit-card-delinquency-rates-20250228.html

Liu, M. T., Brock, J. L., Singh, R., Chu, R., & Sy-Changco, J. (2012). What drives Indian consumer credit card loyalty? The perspective of involvement in reward programmes. The International Review of Retail, Distribution and Consumer Research, 22(4), 365–383. https://doi.org/10.1080/09593969.2012.690776

Murthi, B., Steffes, E. & Rasheed, A. What price loyalty? A fresh look at loyalty programs in the credit card industry. J Financ Serv Mark 16, 5–13 (2011). https://doi.org/10.1057/fsm.2011.3

Statista Research Department. (2022, March 15). Most preferred types of credit card rewards program in the U.S. 2018. Statista. https://www.statista.com/statistics/934479/preferred-types-of-credit-card-rewards-program-usa/