This month's issue features a Special Report on Loyalty that includes an examination of how issuers are coping with increased market pressure to make their rewards programs efficient yet competitive. The section also looks at whether cobranded airline cards remain relevant as more issuers offer reward-point access to virtually any airline.
  U.S. merchants, which have filed a class-action lawsuit against Visa USA, MasterCard Worldwide and several of the card networks' biggest issuers over how interchange rates are set, contend they are paying the brunt of the cost to support rewards programs. They may be right. A recent study by Diamond Management and Technology Consultants found that 44% of the interchange merchants ultimately pay card issuers funds issuers' reward initiatives.
  While the outcome of the merchants' case is anyone's guess, issuers are adjusting their rewards initiatives to better target those customers who generate the most revenue. They also are adding benefits to appease their customers, including lifting restrictions on applicable airlines. Capital One is working especially hard driving that benefit home in its latest marketing efforts.
  Industry experts, though, doubt such initiatives will have much of an impact on co-branded airline reward cards. The two types of reward offerings, they say, appeal to different types of consumers. Airline-specific cards, the experts say, generally attract frequent-flyer customers, while generic reward cards that apply points toward flights or coupons for multiple airlines are more appealing to occasional travelers.
  My feeling is the experts are right. While I don't support the concept of having to pay an annual fee to own a credit card, sufficient numbers of other consumers obviously believe the cost is worth the added perks, such as no blackout dates or seating restrictions airlines often impose.
  If I spent half my life in airports, as many cardholders do, I might change my view on annual fees to avoid many of the hassles inherent with traveling. I also might embrace a specific airline's card to get the most perks available.
  But for now, I'll take the option with my free card of using 25,000 points for either a $250 Home Depot gift card or a $250 coupon toward a domestic flight on any of a variety of airlines.
  I'm still loyal to my card. And isn't that what the issuer wants?
  (c) 2007 Cards&Payments and SourceMedia, Inc. All Rights Reserved.

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