Credit Card Issuers Adapt Rewards to Meet Everyday Expenses

In an effort to compete for customers using credit cards for everyday expenses due to rising prices, some card issuers are offering rewards for basic purchases. The trend is exemplified by USAA's two new credit cards, which offer cash back on groceries, gas, dining, home-improvement costs, and other day-to-day expenses.

The Eagle Adapt Visa card and the Eagle Ascend American Express card both provide such benefits to customers of the $106 billion-asset financial services company catering to U.S. military members. USAA's research indicates that consumers are increasingly using credit-card points for essentials, with 47% of surveyed adults saying they used their rewards to pay for everyday expenses.

This shift represents an opportunity and a danger for credit-card issuers. According to Brian Riley, co-head of payments at Javelin Strategy & Research, there is more risk in the portfolio when customers use their cards for basic necessities like milk, eggs, and bread rather than holiday gifts or luxuries.