Half of the UK’s consumers who own a reward card prefer to choose one, which offers up front rewards rather than a low APR.

Research by Auriemma Consulting Group (ACG) who track market patterns shows that only 13% of consumers opt for cards because of their low annual interest, preferring the instant rewards related to goods and services.

ACG’s Cardbeat study found that consumers are attracted by card rewards with high promotional earnings rates and perceive these to be more valuable than those rewards cards that offer slow and steady earning capabilities.

Matt Simester, Director at Auriemma Consulting Group comments:

“Rewards programmes clearly remain an important element in attracting and retaining card customers. However, consumers need to ensure they choose the right programme to suit their spending habits and lifestyle”

The study revealed that cashback was still the most attractive reward for the majority of consumers.  Barclaycard’s platinum cashback card was seen as the most valuable card on the market because of its 2% cashback on supermarket and petrol station purchases on the life of the card.  It also offers 0.5% on all other purchases.  Cardbeat explained that the simplicity and market penetration of the idea continues to make it the most desirable offer.

The research also showed that many consumers were particularly interested in petrol related offers due to the increasing cost at the pumps.  While presently only 5% of customers have petrol rewards, 56% ranked the benefit as highly valuable. Even those not having petrol-based benefits perceived them to be the second most valuable rewards type behind cashback cards. Citi Shell MasterCard was perceived as one of the most valuable rewards programmes in the market - holders earn up to 6% rebate on fuel purchases.

ACG advised that in future card issuers would need to offer more ways to redeem rewards “The majority of reward cards holders (over 60%) find rewards cards to be most valuable when they offer the ability to choose the reward they receive. ACG believes banks should consider a heavy bias towards open redemption when developing product constructs in order to keep their card at top of wallet.”

Simester added:

“Issuers need to understand that consumers want more control in redemption but the trade-off is that rewards programmes do not have to be as rich in benefits as they have been. I think we’re entering a new era for rewards programmes in the UK and many of the traditional propositions need radical review.”

This comes on the heels of Cardbeat’s analysis of the card issuer’s brand strength, which noted that the cashback driven Barclaycard came out on top.  The study, which evaluates the strength of 17 top UK credit card brands, found that “Barclaycard is the most powerful UK card issuer brand beating Capital One into second spot. Its top position came as a result of having the highest brand awareness and second highest card usage ratings in our study. Wide card ownership also contributed to Barclaycard capturing the number one spot.”

Simester gave a word of warning to both consumers and banks in the coming year:

“As the credit crunch continues to dominate the consumer agenda…Consumers with a poor credit history will find it hard to move issuer, those with stronger credit histories will demand better quality propositions from their current provider. Pressure to reduce costs of servicing, higher average APRs and lower investment into marketing may also impact perceived brand quality this year. I anticipate that there will be a different set of winners and losers at the end of 2008.”