More Credit Cards Pile on Rewards for Mobile Wallet Spending

It's easier than ever to pay with your smartphone and earn extra rewards on your credit card while doing it. Here's what's partially behind the trend.
Claire Tsosie
By Claire Tsosie 
Edited by Kenley Young

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Call it proof we’re living in the future: These days, it’s easier than ever to pay with your smartphone at checkout — and earn extra credit card rewards while doing it.

As the number of mobile payments continues to grow, some major issuers have begun offering bonus rewards for mobile wallet purchases, including:

  • The Wells Fargo Cash Wise Visa® card, which launched in 2016 and offers a small bonus on qualified digital wallet purchases for the first year.

  • The U.S. Bank Altitude Reserve Visa Infinite Card, which launched in 2017 and offers ongoing bonus rewards for eligible mobile wallet purchases.

  • The Chase Freedom® card’s 5% cash-back rewards categories in the first quarter of 2018, which include eligible mobile wallet purchases.

These offers are potentially quite valuable, especially if you pay with a mobile wallet often. Here’s why a few credit card companies are offering them, and what it means for you.

Literally or digitally, being top-of-wallet matters

In mobile wallets, as with old-fashioned wallets, your cards have a pecking order. Some mobile wallets prompt you to select which card appears first. With others, the card used most recently shows up. Regardless of how yours works, issuers want their cards to rise to the top.

For issuers, “there’s a huge upside to being the top-of-wallet card in the mobile wallet. Most consumers aren’t changing their default card in their mobile wallet each transaction,” says Jaclyn Holmes, a director at Auriemma Consulting Group, a payments and lending advisory firm. “For the most part, it tends to be set it and forget it — with one caveat being when a really good rewards offer comes along."

In other words, more mobile wallet rewards can beget more spending on mobile wallets. That was the case for the U.S. Bank Altitude Reserve card, the first U.S. card to offer ongoing rewards on mobile wallet purchases.

“The mobile wallet usage on this product is multiple folds higher than it is on our [other] products,” says John Steward, ‎president of retail payment solutions at ‎U.S. Bank.

What it means for you: By keeping the right credit card at the top of your mobile wallet, you can rake in some serious rewards. But not all offers are ongoing, so keep tabs on when promotions expire.

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The future is mobile

Slowly but surely, mobile wallets are becoming more widely used, and issuers are taking note.

"As we think about how customers want to spend, it’s clear that the trend is moving to more digital, so we wanted to be part of that," says BJ Mahoney, the general manager of the Chase Freedom® card, which began offering 5% cash back on eligible mobile wallet purchases for the first quarter of 2018.

In turn, such rewards could help change consumer behavior. Consider how credit cards became much more widely used around the time they began offering rewards, notes Christopher Barnard, co-founder and president of Points, a loyalty rewards clearinghouse.

“Before 35 years ago, if you asked someone how they wanted to pay for something, the standard response would probably be, ‘If I’m at a grocery store, there’s nothing easier than writing a check’,” he says. “We believe loyalty [rewards have] proven to be a valuable way in which to change consumer behavior, especially in the payments industry.”

What it means for you: Don’t like the idea of a mobile wallet? You don’t have to use one. But if more issuers offer mobile wallet rewards and usage continues to grow, paying with plastic may mean losing out on rewards.

Issuers are testing and learning

When issuers offer a new incentive, there’s no guarantee it will be a success. That’s why they’re monitoring these mobile wallet offers carefully.

“Particularly for the Freedom, we’ll take a look at how the quarter shaped up, and we’ll use that data and information to inform our future strategy,” says Mahoney of Chase. So far, they’ve received “very positive feedback” from consumers, he notes.

It’s not clear whether mobile credit card rewards will be the next big market trend. But if these early offers prove popular, more issuers will likely start flooding the market with competing promotions. For consumers, that would be a win.

What it means for you: As issuers test and learn, credit card offers are only going to get better. Don’t worry if current offers don’t strike your fancy. Issuers come out with new deals frequently, and if your credit is good enough, you’ll be able to take advantage of them.

This article was written by NerdWallet and was originally published by Forbes.

The information related to Wells Fargo Cash Wise Visa® card has been collected by NerdWallet and has not been reviewed or provided by the issuer or provider of this product or service.

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