Should We Cut up Our MasterCard and Visa Cards and Switch to AmEx or Discover?

Should We Cut up Our MasterCard and Visa Cards and Switch to AmEx or Discover?

American Express is the highest-ranked credit card company in J.D. Power and Associates’ Credit Card Customer Satisfaction Study for a fifth year in a row, with Discover a close second. Overall credit card satisfaction has improved for a second consecutive year, following a decline in 2009.

Issuers of MasterCard and Visa cards are lagging quite a distance behind the two leaders. Why is that? Let’s take a look.

AmEx Best in Satisfying Customers, HSBC — Worst

J.D. Power and Associates uses six broad factors to measure credit card satisfaction: interaction, credit card terms, billing and payment process, rewards, benefits and services and problem resolution. The average industry score for 2011 was estimated at 731 on a 1,000-point scale, up from 714 in 2010 and 705 in 2009.

American Express topped the list, slightly ahead of Discover. Barclaycard and Chase are the only other issuers with an above-average score. Bank of America ranks second to last with a score of just above 700, while HSBC is the only issuer to score below 700.

CARD Act Credited with Boosting Satisfaction Scores

The CARD Act of 2009 gets much of the credit for the marked improvement in consumer credit card satisfaction. In the words of Michael Beird, director of banking services at J.D. Power and Associates:

It appears that credit card companies are doing a better job of communicating with customers, which may be an effect of the CARD Act. This improved communication is key to ensuring that customers fully understand their credit card terms — particularly benefits and fees — which helps reduce the number of problems reported and improves the overall experience.

Not surprisingly, consumers also like the lower interest rates, which were a direct result of the wholesale switch to variable interest rates that issuers embarked on once the CARD Act was passed. Of course, once the Fed begins to raise its Funds Target Rate, the credit card variable interest rates will be raised automatically, but that is not a worry for the present.

Why Are AmEx and Discover Better?

Should We Cut up Our MasterCard and Visa Cards and Switch to AmEx or Discover?Here is what the report has to say about the two top-ranked card issuers:

American Express ranks highest in customer satisfaction for a fifth consecutive year with a score of 786 and performs particularly well in the benefits and services, credit card terms and rewards factors. Discover Card follows with a score of 779, and performs well in the interaction factor.

But why is it that the two credit card companies have been able to put such a distance between themselves and the issuers of MasterCard and Visa cards who are mostly clustered around the average satisfaction score?

I don’t think that I have a complete answer to this question, but it seems to me that it could have something to do with the fact that AmEx and Discover act as both issuers of their cards and processors of their transactions. By comparison, their rivals issue cards whose transactions can be processed by any other Visa or MasterCard member.

As a consequence, it is much easier for AmEx and Discover to address customer inquiries and resolve disputes, because they don’t need to turn to another bank for assistance. This would directly affect the interaction, billing and payment process and problem resolution categories in J.D. Power and Associates’ study. That could be enough to account for the results.

The Takeaway

So should we all cut up our Visa and MasterCard-branded cards and switch to AmEx or Discover? Well, over the years I’ve used cards bearing the logos of each of these companies and have not really noticed that big of a difference. My choice has always been based on the size and type of rewards on offer and I think I’ll keep it this way.

Update. J.D. Power’s Michael Beird has provided some additional details about his study’s results in the comments below that help explain why AmEx and Discover score better than the issuers of MasterCard and Visa cards. Be sure to read it.

Image credit: Flickr / Andres Rueda.

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  1. Ray

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