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Friday, December 15, 2023

Rewards boost small business card satisfaction

What's in your wallet? For small business owners the answer may depend on the rewards. According to the just-released J.D. Power 2023 U.S. Small Business Credit Card Satisfaction Study, rewards programs are the largest contributor to small business customer satisfaction with credit card products.

Rising interest rates could change everything, however.

"Card issuers have done a great job of delivering to small business owners services and rewards programs that have helped them through a tough economic period, and now, as the business outlook improves, issuers are being rewarded with higher spend and higher levels of customer satisfaction," said John Cabell, managing director of payments at J.D. Power.

"However," he added, "with interest rates still elevated, two areas of the customer experience that are still lagging are reasonableness of fees and competitive of rates. These will need to be managed carefully by issuers during the next year as more small businesses seek low interest payment plans."

Overall issuers get good marks

Overall satisfaction with card issuers is up seven points over 2022, and it beat the pre-pandemic peak set in 2019. "Card issuers came through for small businesses during a tough economic time, and they are seeing the benefits as small businesses have become more optimistic about the future and spend more money," a J.D. Power spokesman stated in an email.

Nearly four in 10 (38 percent) of small businesses surveyed said they are better off financially than they were a year ago, up from 34 percent in 2022. Also, 41 percent of small businesses are carrying revolving debt, down from 44 percent in 2022.

Business card optimism is borne out by spending. Small businesses are charging on average $13,000 a month using their personal credit cards. It's not just personal credit cards that are getting a workout, either. Seventy eight percent of respondents stated they are using business cards for office supplies, 70 percent are using them for operating expenses, 65 percent use them for travel, 55 percent use business cards for inventory, 49 percent are paying for meals with them, and 37 percent are using the cards for raw materials.

Small businesses that spend $20,000 or more a month using their cards have higher levels of satisfaction with card issuers, driven primarily by increased interaction and improved alignment of spending with rewards programs, according to J.D. Power.

J.D. Power noted, however, that it's not just rewards that drive satisfaction for the highest card spenders. These businesses are also apt to use five or more supplementary card benefits, which further increases overall customer satisfaction and engagement.

Despite gains in spending and satisfaction, credit card terms could become an issue. Business credit card issuers saw improvements in customer satisfaction across nearly every factor evaluated by J.D. Power, with the exception of credit card terms, which remained flat. The firm uncovered concerns around the reasonableness of fees and the competitiveness of rates, especially among businesses with low annual revenues.

And the winners are

American Express was the winner when it comes to overall small business customer satisfaction, no doubt because AmEx has great rewards programs. The irony, of course, is that a lot of small businesses don't accept AmEx from their customers, pointing to the high cost of acceptance vis-à-vis card brands.

Other card issuers that garnered high satisfaction ratings with small businesses were:

  • Capital One (which had the second highest overall satisfaction ranking)
  • PNC (third)
  • Citibank (fourth)
  • Bank of America (fifth)
  • Chase (sixth)
  • U.S. Bank (seventh)
end of article

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