Groupon thinks that it has come up with a smart new idea that could allow you to earn additional rewards when you use your credit cards to pay for goods and services at participating stores, restaurants and other outlets that you use regularly. In effect, it turns your credit cards into loyalty cards.

Rewards credit cards on steroids

So your non-rewards credit cards could earn you rewards, while your cash back credit cards and other rewards credit cards could earn you even more freebies. All you have to do is register your plastic on Groupon’s website, and everything else happens automatically. So there’s no need to use a smartphone or remember to produce a separate loyalty card at the checkout.

Just as with other loyalty programs, it’s likely to be up to each individual merchant to decide on the mechanics and generosity of its particular offer. Many may choose a threshold of spending that entitles you to a major discount on your next purchases. TechCrunch, which broke the story, gave the example of a retailer that offers you $20 worth of goods for $4 after you’ve already spent $100 in that store. However, such an offer would give you a 13.3 percent discount ($16 off a total of $120’s value), and many merchants are likely to pitch their offers at lower levels.

Groupon’s Jeff Holden explained how the new program fits into his company’s wider offerings:

We think there are three components merchants need to run their business in the new world of local commerce. The first is the daily deal, which Groupon perfected as a customer acquisition product and reached massive scale. The second is Groupon Now, its mobile app that lets local merchants do yield management by offering deals when business is slow. The third now is Groupon Rewards, which is built around customer loyalty and retention.

Credit cards as loyalty cards

That makes sense. In the current economic climate, merchants are desperate to acquire and retain loyal customers, but most existing loyalty programs are cumbersome, and require consumers to jump through hoops in order to get and redeem rewards. The advantage of the Groupon service is that it is so easy to use: once a card is registered the consumer has to do nothing.

However, not everyone is convinced. Some of the reader comments that appeared after TechCrunch’s story raised serious issues. Readers pointed to retailers whose fingers had allegedly been burned in previous Groupon programs, and questioned the likely return on investment for merchants who participate in this new one. (Of course, reader comments don’t necessarily represent unbiased journalism and should often be taken with a grain of salt.)

Some consumers may also be resistant to the idea of sharing their card details and spending patterns with third parties. However, if you’re not one of them, you may see little reason not to participate. After all, what have you got to lose?

Published 09/29/11 (Modified 04/20/12)