Did Kroger Just Trade Debit Rewards for Digital Coupons and Credit?

Debit remains among consumers’ preferred payment methods, allowing them to spend only the funds on hand.

But for merchants, rewarding consumers for using debit cards — specifically, merchant-branded cards — may hold an uneven track record.

Kroger announced last week on its web page, that “We are no longer accepting applications for the Rewards Debit Card. We apologize for the inconvenience.”

That simple statement rests atop a long, detailed discourse on how the debit card rewards, available since early 2019, worked: Holders earned 2% cash back on Kroger branded goods (rewards were doubled when transactions were done through Kroger Pay).

In further explanation of what’s transpired, as detailed in social media and on trade sites such as couponsinthenews.com, the company has said that it is “always looking to improve our products and shopping experience so we are sun-setting this to focus on enhancing other savings solutions for our customers.”

PYMNTS has reached out to Kroger for comment. None had been received at this writing.

Online Coupons Hold Appeal

Discussion in recent earnings calls lays out some of the other potential avenues of focus.

As Rodney McMullen, CEO, said on the call, “Our customers are saving through loyalty discounts, including weekly specials and yellow tag promotions, engaging in our broad assortment of Our Brands products, and redeeming personalized digital coupons and fuel rewards.” The company disclosed that during the first quarter digital coupon redemptions increased $180 million as digital coupon downloads were up 48%.

Elsewhere, PYMNTS data shows there’s an increased embrace of store credit cards, which of course represents another avenue to 1) bolster top line and 2) cement loyalty.

Credit Still Has Firepower

As we wrote here at the end of last year, more than a quarter of consumers have a store card, and TransUnion had seen high single-digit percentage point gains in store card originations headed into the end of the year.

The data shows that rewards were cited by 42% of respondents for their use of these cards — and less than a quarter said the same for other methods (which would include debit). Consumers with store cards also use them 87% of the time when they can, according to PYMNTS data.

Target’s own financial reports with the SEC indicate that the penetration of purchases using RedCard, the credit card that offers 5% discounts, has been meaningful — at 19% in the most recent quarter, down just a bit from the 20% seen last year. Elsewhere, the company disclosed that credit card profit sharing from its pact with TD Bank brought in about $174 million in the latest quarter, less than 1% of consolidated revenues.

The urge to use credit remains strong, as we’ve found that 43% of Gen Z consumers and millennials have shifted more of their spending onto their cards. For the merchants, coupons delivered in context may augment the desire to use credit, and keep consumers spending at the registers, online and offline.