A bank’s income statement reads a card swipe in one direction. The merchant pays the card’s issuer a fee on every purchase, called interchange, and the issuer pays part of it back to the customer as a reward. The rewards program is judged by how much of that fee it gives away.
That reading is correct, and it is far too small. A swipe is not a cost waiting to be rewarded. It is the clearest signal a bank gets of what its customer is about to need.
In March, one customer’s card shows up at a hardware store and a paint shop, then at a home inspector, then at a moving company that takes a deposit. It pays her the same cash back at each of them that it pays on her groceries, because the program has no way to tell a move from a grocery run. She is buying a home, and she has not yet locked a mortgage rate.
Her bank’s income statement books only the cost.
Card rewards are paid out of the swipe they reward
JPMorgan Chase shows the economics plainly, because its annual report sets the reward beside the income that funds it. Its card income starts with interchange and merchant processing income, which came to $36.2 billion in 2025. Reward costs and co-brand partner payments took about 82% of it. In its consumer bank, card sales grew 7%, yet higher reward costs and partner payments more than offset the gain, and card income fell.
The reward is paid out of the swipe it rewards, which means that when rewards grow faster than spending, card income can fall as sales rise. Capital One records its rewards expense as an offset to interchange income. American Express says rewards and related costs grew faster than revenue as its mix shifted toward premium cards.
When rewards consume most of the fee that pays for them, the head of cards cannot approve the next reward, or the next co-brand renewal, without knowing what the last one returned.
The swipe is the earliest clue a bank gets
The interchange on a home inspection is small. What the purchase says about her is worth a mortgage.
A card sees intent before the rest of the bank does. Deposits and loan applications move after a customer has made up her mind, but the card moves as she decides, which puts it ahead of every other product she holds. That makes the swipe more than the expense a rewards program exists to offset. It is the signal the whole relationship runs on.
It also makes the swipe a question for the chief executive, because the signal crosses the organization chart. When the card, the deposits, and the mortgage report to different leaders, the clue in March belongs to nobody. The card team sees a reward to pay, and the mortgage team does not meet her until she applies. A pre-approval does not bind her to a lender, and until she locks a rate, lenders still compete for the loan.
Loyalty Juggernaut’s work with financial institutions starts from the same diagnosis: “Checking sees a balance. The card sees transactions. The mortgage sees a household the rest of the bank can’t.”
The bank already has the data. What it lacks is an owner who is asked to act on it, and naming that owner is a decision only the top of the bank can make. A bank that makes it turns its rewards program into an enterprise growth engine, one that finds the mortgage before a competitor does.
Bank loyalty programs come in three forms, and each reads a different signal
The term covers three different machines, and Bank of America runs all three at once. Card rewards pay for spending on a credit or debit card, and the issuer funds them out of interchange and annual fees, as Chase does with Ultimate Rewards. Relationship rewards pay for the balances and products a customer holds across the bank, and BofA Rewards is the clearest case. Card-linked offers are cash back deals from a single brand, which the customer switches on in her banking app and the brand pays for when she buys.
A program built only on the card knows what she buys. One that also reads her balances knows what she keeps, and only the two together tell the bank that the customer paying a home inspector also holds the savings for a down payment. Offers show what she does when a brand gives her a reason.
For a head of loyalty, the design question is which of these signals the program reads, and whether all three land on one customer record or sit in three systems run by three teams.
The strongest programs reward the relationship and put the card inside it
Bank of America built the clearest US example. In May 2026, BofA Rewards took over from Preferred Rewards, and any client with an active Bank of America personal checking account can join, with no minimum balance. Tiers follow her combined deposits at the bank and her Merrill investment accounts, and a higher tier raises the rewards on her Bank of America credit cards.
The card has become one benefit of the relationship. The bank now prices the reward against the deposits and investments she keeps there, so a customer who moves her savings in earns more on the card purchases she already makes.
That is the right direction, and it still reads her late. Her balances will change when the mortgage closes, but her card showed the move in March, so a program that waits for balances to change reacts after she has locked her rate.
Measurement needs the same care. Bank of America reported a 99% retention rate for Preferred Rewards, and a loyalty team should read it with caution, because members who qualify by balance were committed before the program found them. A retention rate is not proof that the program kept anyone. It is a record of who stayed, and only a controlled comparison can show what the tiers changed.
Merchant-funded offers pay for relevance, and interchange still pays for the program
Chase runs its own offers business, called Chase Media Solutions. There the swipe does two jobs. It picks the customer who sees an offer, and it proves the sale afterward. Brands pay only when a customer views a campaign and then buys, and Chase gives them incremental lift reports, which measure the sales a campaign added beyond what would have happened anyway.
That offers money is real, and it is still small beside the cost of rewards. Cardlytics, which runs offers inside the apps of JPMorgan Chase and other banks, reported $385.0 million in billings for 2025. A full year of that would not cover a single week of JPMorgan Chase’s reward costs and partner payments. Interchange and annual fees keep paying for the base reward, so a plan that expects brands to fund the whole program starts in a hole.
The choice of who runs the offers is a live one. Bank of America sent Cardlytics a non-renewal notice in April 2025, and its campaigns there ended in January 2026. When a bank runs its own offers, as Chase does, the customer’s attention and the proof of lift stay with it. Building an offers business or renting one is a decision about who owns the data.
A reward has earned its cost when a holdout shows the change
The number that matters is incremental spending, the part of a customer’s spending that would not have happened without the reward. A holdout finds it. The bank leaves a random group of eligible customers out of an offer, keeps everything else the same, and compares the two groups over the same weeks. The gap between them is what the reward bought. The loyalty program ROI guide walks through the method.
Restraint belongs in the plan, too. A customer who has already applied for the bank’s mortgage does not need points to finish. She needs a fast approval, and every reward spent on a decision she has already made is a discount on business the bank was going to win anyway.
Community banks and credit unions hold an edge in debit
Regulation II, the Federal Reserve rule that caps the interchange large banks earn on debit cards, exempts banks and credit unions with less than $10 billion in assets. In 2024, the average debit swipe at an exempt issuer carried more than twice the interchange of a swipe at a capped one, and that margin can fund a checking reward.
The playbook fits a smaller balance sheet. A rewards checking account can pay for direct deposit and a monthly count of debit purchases. Those are the habits of a primary account, the one where a customer’s paycheck lands and her bills get paid. Merchant-funded offers can start with the local businesses she already pays by card, and combined-balance tiers and a holdout on the first offer work at any size.
A community bank does not need the largest bank’s budget. It needs a record that holds all of her accounts, and a team that is asked to act on the clue in every swipe.
Six decisions turn a card program into a relationship program
- Price each reward against the swipe that pays for it. Track reward cost as a share of interchange and fees, by product and segment. JPMorgan’s 82%, which includes co-brand partner payments and merchant processing income, shows how far the ratio can run. A reward that grows faster than spending shrinks the income it was built to grow.
- Put the whole relationship on one record. Set tiers on the total of every account she holds, and the loyalty tier strategy guide covers the thresholds. Federal Reserve rules include a safe harbor for combined-balance discounts, a set of conditions under which the discount is treated as allowed. It applies when every deposit counts and deposits count at least as much as other products.
- Read spending as a life event. A home inspector and a moving company point to a purchase, and a purchase changes what she needs from the bank. Act only on the signals she has agreed the bank can use, and the loyalty personalization guide sets out how.
- Let brands fund the targeted layer. Brands pay when a customer who saw the offer buys, and a holdout shows how much of that was new.
- Prove the lift. Test every offer against a randomly chosen group left out of it. Pilot a new tier benefit in one market, and compare that market with one that waits. Stop funding what the holdout shows was free.
- Protect the value she has earned. The Consumer Financial Protection Bureau has warned that devaluing earned credit card rewards can break federal consumer law. An earned point is a promise already made. Change future earn rates in the open, and honor the balance she holds.
GRAVTY® reads the swipe as part of the relationship
In GRAVTY®, that March reads differently. Patented multi-dimensional behavior tracking puts the home inspector and the moving company on the same member record as her checking and savings.
Agentic AI Compass works like a team of expert analysts. The bank’s loyalty team asks Compass to compare members with that spending pattern against the rest of the program, and Compass tests a relationship offer in simulation before anything reaches her. The loyalty team then runs the best offer against a holdout, so the bank knows the lift before it pays for the offer at scale.
The offer starts with the mortgage discount her tier already earns. Patented AI-driven mass individualization shapes the rest: a bonus for moving her savings, sized to her. The loyalty team sets the tier and bonus rules itself in GRAVTY Visual Rules, a patented no-code rules engine.
None of that replaces the bank’s judgment. It gives the judgment a head start.
She hears from her bank that week, before she locks a rate. The offer is about the house.
The bank that reads the swipe keeps her
She will not remember the cash back from the paint shop. What she will remember is whether her bank noticed the house before she locked her rate, and whether its offer was worth taking.
Her card still pays 1.5% on groceries, and the income statement still books the reward as a cost, because that is its job. What changed is that the bank read the purchase before it paid for it.
Any bank can pay for the swipe. The one that reads it keeps her.
The numbers behind bank loyalty programs
These are the figures behind this essay. Each one comes from the company’s own filing or program page, or from a regulator.
The reward bill at the largest issuers
| Issuer | Rewards cost in 2025 | Measured against | What the filing adds | Source, month |
|---|---|---|---|---|
| JPMorgan Chase | $29.7 billion in reward costs and partner payments | $36.2 billion of interchange and merchant processing income, about 82% | Card income fell to $4.7 billion from $5.5 billion; consumer bank card sales grew 7% | 10-K, Feb 2026 |
| Capital One | $11.5 billion in customer rewards expense, up from $9.0 billion | Recorded as an offset to interchange income | Includes Discover from the May 18, 2025 close; its networks and data can drive value for merchants | 10-K, Feb 2026 |
| American Express | $18.4 billion in Card Member rewards | $72.2 billion in revenue net of interest expense, about a quarter | Rewards and related costs grew faster than revenue with the shift to premium cards; partner-funded value is one lever | 10-K, Feb 2026 |
The three forms of bank loyalty program
| Form | What the program rewards | Who pays for it | Market example |
|---|---|---|---|
| Card rewards | Spending on a credit or debit card | The issuer, out of interchange and annual fees | Chase Ultimate Rewards, American Express Membership Rewards |
| Relationship rewards | Balances and products held across the bank | The bank, through card bonuses and lower rates | BofA Rewards |
| Card-linked offers | A purchase at one brand after she activates the offer | The brand | Chase Offers, Amex Offers |
Seven US bank programs compared
Each row comes from the bank’s own page or filing, checked in September 2026.
| Program | Form | Earn design | Tie to deposits or balances | Source, month |
|---|---|---|---|---|
| BofA Rewards (Bank of America) | Relationship | Tiers on Bank of America and Merrill balances add 10% to 75% to card rewards; brand-funded cash back deals from 15,000+ brands | Open to any active personal checking client; 13.3 million enrolled by June 30, 2026. Preferred Rewards, which it replaced, reported 11.4 million members and a 99% retention rate | Release, Feb 2026; program page, Sep 2026; 2025 annual report, Mar 2026; results, Jul 2026 |
| Chase Ultimate Rewards | Card | Points across the Freedom, Ink, and Sapphire card families; 1 to 15 bonus points per $1 at 1,000+ stores | Points pay out to an eligible Chase account or, since September 2026, as cash to invest with J.P. Morgan | Chase, Sep 2026; release, Sep 2026 |
| American Express Membership Rewards | Card | Points on enrolled cards, with bonus points in some categories | Amex offers checking and high yield savings and counts deposit rates among its incentives | 10-K, Feb 2026 |
| Citi ThankYou Rewards | Card | Citi Double Cash splits 2% cash back into 1% at purchase and 1% at payment, in ThankYou Points | Points pay out to any checking or savings account | Citi, Sep 2026 |
| Capital One Rewards | Card | Miles or cash back on every purchase, kept for the life of the account | Its debit cards now run on the network it bought with Discover | Capital One, Sep 2026; 10-K, Feb 2026 |
| Wells Fargo Rewards | Card | Rewards on virtually all purchases with an eligible card | Rewards post to an eligible Wells Fargo card or checking account | Wells Fargo, Sep 2026 |
| U.S. Bank Smartly Visa Signature | Card tied to balances | 2% cash back on every purchase, rising to as much as 4% on the first $10,000 each billing cycle | The 4% requires $100,000 or more in qualifying Smartly balances | U.S. Bank, Sep 2026 |
Of the seven, only BofA Rewards and the U.S. Bank Smartly card raise the reward itself as the customer’s balances grow. The other five tie balances in at redemption, if at all.
Two ways to run merchant-funded offers
| Offer network | Where the offers run | Scale | What the filing or page shows | Source, month |
|---|---|---|---|---|
| Chase Media Solutions (Chase Offers) | Chase’s own channels, targeted on purchase history | 80 million customers at launch; 84 million by September 2026 | Brands pay when a customer views a campaign and makes a purchase, and get incremental lift reports; Chase says offers drove $11.2 billion in merchant spend in 2025 | Launch, Apr 2024; Chase, Sep 2026 |
| Cardlytics | The JPMorgan Chase, Wells Fargo, and American Express apps, among other banks | $385.0 million in billings for 2025 | Bank of America sent a non-renewal notice in April 2025, and its campaigns ended in January 2026; second-quarter 2026 billings fell 34% | 10-K, Mar 2026; 2025 results, Mar 2026; notice, Apr 2025; Q2 results, Aug 2026 |
Debit interchange under Regulation II
| Debit issuer | Interchange rule | Average interchange per debit swipe, 2024 | Source, month |
|---|---|---|---|
| Covered: $10 billion or more in assets | Capped at 21 cents plus 5 basis points | 23 cents | Federal Reserve, Dec 2025 |
| Exempt: less than $10 billion in assets | Exempt from the cap | 51 cents | Federal Reserve, Dec 2025 |
Frequently asked questions
What is a bank loyalty program?
A bank loyalty program rewards customers for the business they bring to the bank. It comes in three forms. Card rewards pay for spending. Relationship rewards pay for balances and products held. Card-linked offers pay cash back that brands fund. In an Accenture study of 49,300 bank customers, 60% want rewards based on their relationship with the bank. Only 45% are satisfied with what they get, which is the gap a relationship program is built to close.
Which bank has the best loyalty program?
For a bank designing its own program, Bank of America’s is the one to study, because it rewards the whole relationship. BofA Rewards replaced Preferred Rewards in May 2026. It sets tiers by a client’s combined balances at Bank of America and Merrill, and it had 13.3 million clients enrolled by June 30. Chase shows the other model, a currency: Ultimate Rewards points transfer to airline and hotel partners, the model to study for a bank that competes for travel spend.
Which banks have the best perks?
Bank of America and U.S. Bank have the perks most worth studying, because both tie the perk to the balances a customer keeps, the deposits a bank most wants to hold. BofA Rewards includes discounts on home and auto loans among its benefits. U.S. Bank’s Smartly card pays up to 4% cash back on the first $10,000 in purchases each billing cycle, but only to clients with $100,000 or more in qualifying balances. A flat card reward pays the same to a customer who keeps nothing at the bank.
What are card-linked offers?
Card-linked offers are cash back deals from a single brand, delivered in a bank’s app or website. The customer activates an offer and pays with her card, and the brand funds the reward. For the bank, the offers add a revenue layer and proof of purchase. Chase charges brands only when a customer views a campaign and buys, and it says its offers drove $11.2 billion in spend to the merchants that ran them in 2025.
How do banks pay for credit card rewards?
Banks pay for credit card rewards mostly out of interchange, the fee merchants pay on each card purchase, plus annual fees. JPMorgan Chase spent $29.7 billion on reward costs and partner payments in 2025, about 82% of its $36.2 billion in interchange and merchant processing income. Capital One and Bank of America also net rewards against interchange. Brand-funded offers add a smaller layer.
Can a bank devalue rewards a customer has already earned?
No bank can devalue earned credit card rewards without legal risk. The CFPB’s Circular 2024-07, released in December 2024, says doing so can break federal consumer protection law. That holds even when a merchant partner makes the change. The safer path is to change future earn rates with notice and honor the points already earned. Consumers earned $47.5 billion in credit card rewards in 2024, nearly double 2020, the CFPB’s 2025 market report says.
