Card reward programs are well past their Sperry & Hutchinson Green Stamps phase, where people redeem their rewards by picking items from a catalog that stays pretty much the same all the time. Consumers demand far more flexibility these days, and analysts say banks need to get creative about delivering it.

Wells Fargo is among those rising to the challenge. This fall, it began giving credit card customers the option of using their rewards to pay down loans.

The idea is similar to its Home Rebate Card, which automatically puts the 1% cash back that cardholders earn toward the principal on their Wells Fargo home loan.

But now the rest of the company's 8 million cardholders are able to apply their rewards to other types of Wells loans if they want, including auto loans and home equity lines of credit. Participants can make changes at any time, opting to funnel the rewards into a savings account or a different loan product instead.

Brent Vallat, Wells Fargo's head of consumer credit cards and personal lines and loans, says expanding what consumers can do with their rewards in a way that is relevant to them should pay off in increased loyalty.

"It helps us engage the customers in a deeper way, because they know there's a connection between their rewards and their loans or their savings," Vallat says. "We want to make that card have more value to the other products."

Wells Fargo's program appears to be unique in the way it ties a card with a loan in an ongoing way. Michael Misasi, a senior analyst at Mercator Advisory Group, says it is an interesting idea because it not only gives cardholders flexibility for using their reward points, but introduces them to other bank products.

He says many banks are working to integrate reward programs across the entire banking relationship lately. But a one-time deal is a more common strategy, where cardholders receive bonus reward points for taking out a loan or signing up for a premium checking account.

Other banks also have started experimenting with allowing cardholders to put rewards directly into a savings or checking account, in some cases providing an extra incentive to do so. Both Bank of America and SunTrust give customers a 10% cash back bonus for depositing their rewards in an account with the institution. JPMorgan Chase awards cardholders a 10% bonus just for having a Chase checking account even if the rewards are not deposited there.

Misasi says issuers in general are adding to their list of redemption options, "whether it's giving points away for a donation to charity or being able to transfer points to hotel or airline programs."

Getting customers to use the card more in the short term is only part of the motivation, he says. Strengthening the customer relationship for the long term is the main goal.

Among Wells' card customers, those with Home Rebate Cards do about three times more spending on their cards. Vallat says he thinks the mortgage rebate is an incentive that helps put the card in the coveted top-of-wallet position. So giving a similar incentive to other loan customers makes sense. "Maybe someone is not a homeowner yet, or they've paid their mortgage off already," Vallat says. "That same principle can apply."

Citigroup and American Express also have made recent changes to give cardholders more flexibility. As of late November, Citi began letting customers use points from the Thank You Rewards program to pay for just about any online purchase. Though Citi already had offered thousands of rewards through its program, ranging from gift cards to travel, it says this new option for spending points essentially turns whatever someone wants to buy into their own personal reward.

Using reward points to pay for charges on an Amex bill got a lot easier in late November as well, when the company incorporated that option into its smartphone app. The points can be used for purchases as small as $1, making rewards more attainable and flexible, says David Yoo, Amex's senior vice president of mobile products and services. "Membership rewards points can now be part of the everyday, and not an afterthought or something to use later."

Analysts say consumers are gravitating toward options like these, so banks should take note.

"There is a trend of customers having greater control" over reward redemptions, says MasterCard's Bob Grothe, who sees an upside for banks that respond by offering more flexibility.

"When you do this, you are going to move your program from 'close to what I want' for customers to 'exactly what I want.' So don't fight that customer-control trend. Embrace it and use it to your advantage."

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