Cashback cards take the lead as U.S. cardholders struggle with debt

By Gloria Methri

As the financial health of U.S. credit cardholders continues to deteriorate, the once-popular points, miles, and perks that dominated credit card marketing are giving way to cashback rewards and lower-fee cards.

According to the J.D. Power 2024 U.S. Credit Card Satisfaction Study, only 46% of cardholders are financially healthy, while a staggering 51% carry revolving debt. Compounding this issue, the average interest rate on new purchases has surged to 15.6%, placing both cardholders and issuers in a precarious position.

Shifting Preferences: From Points to Cashback

“Cardholders are facing mounting day-to-day financial pressures, which are showing up in the form of high levels of revolving credit card debt, declining levels of financial health, and a migration away from points/miles cards,” said John Cabell, Managing Director of Payments Intelligence at J.D. Power. He emphasized that higher annual fees associated with traditional reward cards are becoming less appealing in today’s challenging economic environment.

Key Findings from the 2024 Study:

Cashback Cards Dominate 

A majority (58%) of cardholders now use cashback cards, compared to just 31% who prefer points/miles cards and 11% who use value cards (e.g., credit-building cards with no rewards). A significant driver of this shift is the desire to avoid higher annual fees. Additionally, cashback cardholders redeem rewards more often for a statement credit (21% vs. 9% for points/miles).

Financially Unhealthy Opt for Lower Cost Cards

As financial health declines, more cardholders are gravitating toward cashback and value cards. In 2024, 54% of cardholders are classified as financially unhealthy. The use of points/miles cards among this group has dropped from 31% in 2023 to 27% in 2024, reflecting the ongoing trend toward lower-cost alternatives.

Rising Revolving Debt and Interest Rates

For the second consecutive year, 51% of cardholders carry revolving debt. The average interest rate on new purchases has risen to 15.6% in 2024, up from 14.6% in 2023. This has resulted in cardholders spending $103 less per month, on average, than they did in 2023. The percentage of cardholders who believe their card’s perks improve their lifestyle has also declined to 25% in 2024.

Customer Satisfaction Linked to Financial Health

While overall customer satisfaction declined by just 2 points (on a 1,000-point scale) this year, perceptions of credit cards vary widely based on financial health. Satisfaction improved by 2 points among cardholders without revolving debt but dropped by 5 points among those with revolving debt.

Automated Customer Service Underwhelms

Automated customer service, including phone and virtual assistant channels, continues to underperform compared to live representatives and digital interactions via email, online chat, mobile app messaging, text, and social media. The overall satisfaction score for automated customer service is 609, which is 40 points lower than the average customer service satisfaction score.

Card Rankings: The Best and Brightest

The survey ranked credit cards based on customer satisfaction, with American Express leading among issuers for the fifth consecutive year with a score of 634. Discover and Capital One followed with scores of 629 and 620, respectively. Among bank rewards credit cards with no annual fee, the Capital One SavorOne Rewards Card ranked highest for the second consecutive year. Other top-ranked cards include the Bank of America Premium Rewards Elite and the Apple Card (Goldman Sachs), which ranked highest in their respective categories.