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Credit Card Rewards History
Consumer rewards programs have been around for a long time and are the basis for the kinds of programs that credit cards offer. These programs are designed to show appreciation for customer loyalty while encouraging customers to continue their business.
It is quite likely that most everyone is familiar with rewards programs these days but most credit card consumers are probably not aware of how these programs actually began. In fact, rewards programs did not start with credit cards but with shopping networks where people would buy things that they need and then be rewarded for their continued loyalty. Typically, rewards were simply discounts or free items of similar ilk to that which they had purchased.
S&H Green Stamps
In the late 1800's Thomas Sperry and Shelly Hutchinson founded a company that sold stamps to retail merchants. When a customer shopped at a store that was owned or operated by a merchant with "S&H Green Stamps" they would earn bonuses based on how much they bought, which was represented by a green stamp. Customers could earn Green Shield Stamps at:
- Department stores
- Gas stations
- Various other retailers
When a customer earned enough Green Shield Stamps (by shopping at any of the participating retailers) they could redeem them for products in the company's catalog or at a local Green Shield shop. This was a popular program in the United States from the 1930's all the way through the 1980's. However "stamp" programs still exist and are quite successful. If you've ever carried a little card that says something to the effect of "Buy 10 cups of coffee and get 1 free," then you have participated in a program similar to the S&H Green Stamps program. These are common to many different kinds of businesses including:
- Coffee shops / small delis
- Gas stations
- Garages (lube jobs and oil changes)
- Smoothie shops
Because of the success of the S&H Green Stamps loyalty programs, domestic air carriers took notice. This is when airline mile programs got started. These programs rewarded air travellers who showed loyalty to a particular air carrier. Within the next few years credit card companies caught drift of how successful this was and started implementing the same program as part of their product benefits and further developed more diverse loyalty programs.
Airline mile programs are now much different than the originals. Some credit cards require you to use your airline miles with only one carrier or one family of carriers. Others let you choose your carrier. Many of these programs also let you use your miles towards other travel arrangements like rental cars or hotel rooms. Similarly, many of these cards also offer auxiliary benefits like additional travel insurances because they know that a person who redeems their travel rewards for actual travel arrangements may need extra benefits that are catered towards that particular activity.
It was only a matter of time before credit cards would get to a point of offering cash rebates as a benefit. The first card to offer a cash rebate to customers was the AT&T Universal Card which would assign points to your account based on purchases made and then apply the rebate towards your AT&T phone bill. It was not until Discover Financial Services (a division of Morgan Stanley) introduced an annual cash rebate in 1986 that the " Cashback" option became a standard in the industry. Of course, these days Discover is a leader in "Cashback" options offering cards with a variety of ways for you to earn "Cashback" rewards.
Currently more than sixty percent of all credit cards offered to United States financial customers offer some kind of rewards program. These numbers are based on industry estimates so take it with a small grain of salt. Still, it's probably a relatively accurate estimation. Loyalty programs are now very diverse and can offer all kinds of benefits:
- Cash rebates
- Airline miles
- Travel rewards
- Gift cards
Customer loyalty programs have been around for nearly a century but most people are probably only familiar with the newest iteration: credit card rewards programs. Although this history is relatively short it has been very successful and widely celebrated in the financial industry.
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