• by Judy Warner , April 13, 2007

When it comes to consumers and credit cards, it's all about choice. To wit: a bevy of recently launched or relaunched cards allows cardholders to specify their rewards.

Discover Financial Services has rebranded two of its credit cards. The Discover More card replaces the Platinum card, while the Discover Open Road card replaces the Gas Card. Both cards feature the brand's distinctive orange "core" design and provide members with Discover's now standard 5% cash back plus additional bonuses that can be redeemed as a statement credit, direct deposit or check, or gift cards from brand-name partners. By using their Discover More card when shopping at online retailers such as Target, Overstock and Barnes & Noble, cardholders can "accelerate" their cash back rewards from 5-20%.

What distinguishes these cards from their predecessors, says Discover CMO Margo Georgiadis, is that they "have distinct cash rewards accelerators that enable consumers to get more money back in the categories where they use credit."

Consumers, however, are expressing a preference for airline cards over cash-back cards.

New research from Auriemma Consulting Group shows that while consumers consider cash rebates the "king of rewards," the most frequently used rewards card are now airline cards, says ACG's Megan Bramlette, who edits the syndicated report called "Cardbeat." In 2005, 53% of reward card users reported their card of choice was a cash-rebate card. That percentage fell to 39 in 2006. During that same time frame, airline cards grew in popularity, from 41% to 48%.

In the current environment of rising interest rates, consumers are starting to shift away from rewards and toward credit products that feature a lower APR. According to the "Cardbeat" research--based on interviews with 508 credit card users in December 2006 and 500 users in June 2005--25% of respondents cited APR as the primary reason they use a particular rewards card--up 14% from the 2005 survey.

Some of the cash products that are available are beginning to be pulled back as banking giants such as Citi seek to reduce costs. One example cited by Bramlette is Citi, which recently reduced its earning rate from 5 to 2% while adding more merchant categories.

Another growing trend among credit card issuers? Tying cashback rewards to mortgage payments. Countrywide Financial Corp. and First USA, a unit of Chase Bank, this week introduced the "Countrywide Rewards Platinum Visa Card" with double rewards. What that means is that cardholders earn one point for each dollar spent. They may double their rewards by converting their points to pay down the principal balance on their Countrywide mortgage.

"The mortgage rebate cards are gaining traction. I would suspect that all the big lenders will have credit card products tied to mortgages," says Bramlette. Countrywide, she points out, is "trying to drum up excitement for both its credit and mortgage products, so they're putting some muscle into it."