Credit Card Reward Redemption Survey Member Research

June 13, 2016

Background, Objectives, & Methodology Detailed Findings Appendix

Background,Objec1ves&Methodology

Background&Objec1vesOnJune20Costcowillnolongerbeaccep6ngAmericanExpresscardsandwillstartaccep6ngVisacreditcards.CurrentCostcoAmexcardholderswillautoma6callybeissuedaCostcoAnywhereVisaCardbyCi6asareplacement.WhilethenewcardoffersaBrac6vebenefits,therewards,intheformofavoucherthatcanberedeemedforcashorCostcomerchandise,willbeissuedonlyonceayearinFebruaryfortheprioryear’srewards.Thesevoucherscanonlyberedeemedin-personataCostcowarehouseoutlet.

NavyFederalwasinterestedinunderstandinghowmembersfeelaboutthepoten6allylongwaittoreceiverewards(cashbackearnedinJanuary2017won’tbeawardedfor13months)anduseofavoucherratherthandirectdeposittoacheckingorsavingsaccount.

Specificareasofinquiryincluded:

§  Wouldmembersratherreceivecashrewardsdepositeddirectlyintotheiraccountorhaveavoucherthatneedstoberedeemedataspecificretailer?

§  Wouldtheypreferreceivingtheirrewardsonceayearorastheywereearned?

Methodology•  10-minuteonlinesurvey

•  Fielddates:May31-June7,2016

•  Samplesize:1,204NavyFederalmembersaged18andoverwhohaveamajorcreditordebitcard.

–  Respondentsweredrawnfromlistsofmemberswholivewithina15-mileradiusofaCostcowarehousestore.

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DetailedFindings─RewardsRedemp1on─

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Detailed Findings Background, Objectives, & Methodology Appendix

TypeofRewardsPreferred

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Q:Whetherornotyoucurrentlyhaveacreditcardthatearnsrewards,whattypeofrewardsdo/wouldyouprefer?Base:Totalrespondents.(n=1204)

›  Respondentswouldoverwhelminglyprefertoreceivecashrewardsfromacreditcardthatearnsrewards.

MostPreferredReward

(Ranked#1)Cash 61%Travelrewards 18%Gidcardsthatcanbeusedanywhere 14%Merchandise 3%Gidcardsforaspecificretailer 3%Merchandisefromaspecificretailer 2%

Detailed Findings Background, Objectives, & Methodology Appendix

PreferredMethodforRewardRedemp1on

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›  Easeofredemp6onforcashrewardswasparamountformostmembers.

›  Almostnoonepreferredreceivingavoucherredeemableataretailstore.

Q:Howdo/wouldyouprefertoreceivecashrewards?Base:Totalrespondents.(n=1204)

Directdeposittocheckingor

savingsaccount81%

VisagiLcardsentinthemail

18%

Voucherthatneedstobe

redeemedataretailstore1%

PreferredRedemp1onMethodforCashRewards

Detailed Findings Background, Objectives, & Methodology Appendix

DesiredFrequencyforReceivingCreditCardRewards›  Desiredfrequencyforreceivingcreditcardrewardsvariedamongrespondents.

›  Whatisclearisthatfewpeoplewouldbesa6sfiedwiththeprospectofreceivingrewardsonlyonceayear.

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FrequencyforReceivingRewards

Q:Howfrequentlydo/wouldyoupreferreceivingyourcreditcardrewards?Base:Totalrespondents.(n=1204)

Detailed Findings Background, Objectives, & Methodology Appendix

38%

29%

23%

11%

Atmyrequest Monthly Astheyareearned Yearly

DetailedFindings─ImportanceofNetwork─

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Detailed Findings Background, Objectives, & Methodology Appendix

generallylookingformore“op6ons”especiallyincasetheirVisacardisnotacceptedbyamerchant.

ImportanceofCreditCardNetwork CurrentVisacardholderswereaskedwhethertheywouldwanttheirnextcreditcardtobeanotherVisacardoronefromadifferentnetwork.

›  Slightlymorethanhalffeltthenetworkdidn’tmaBer.

›  Onlyone-in-tenwouldwanttheirnextcardtobefromadifferentnetwork.

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WhetherorNotNextCardWouldBeaVisaCard

Q:IfyouweretoapplyforanothercreditcardwouldyouwantittobeaVisacardoracreditcardfromadifferentnetwork?Base:Visacreditcardholders.(n=808)

Generallylookingformore“op6ons”especiallyincasetheirVisacardisnotacceptedbyamerchant.

TheseVisacardholderssaytheyare“comfortablewiththe[Visa]productandservices,”likethatthecardisaccepted“everywhere”andthatit’sjustwhattheyareusedto.

Thosewhodon’tcarewhichnetworktheirnextcardisfromgenerallyfallintotwogroups:•  ThosewhoseenodifferencebetweenVisaand

MasterCard.•  Otherswhofeelthatinterestrateand/or

rewardsaremoreimportantintheirchoiceofacardthanthenetworkitisaffiliatedwith.

“Visa,MasterCard–what’sthedifference?”

“I’mgoingtolookforthebestdealforme.”

“Itisirrelevanttome…MasterCardorVisa.Itismoreabouttheprogramandinterestrateassociatedwiththecard.”

Detailed Findings Background, Objectives, & Methodology Appendix

Op1malNumberofCreditCards›  Memberswereaskedhowmanycreditcardstheythoughtpeopleshouldown.

›  Averagenumberwas2.6

›  Thisissimilartotheactualnumberowned.

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Op1mumNumberofCreditCards

NumberofCreditCards

OwnedNone 2% 7%1 15% 21%2 40% 24%3 25% 17%4 9% 13%5ormore 9% 19%Mean 2.6 2.5

Q:Regardlessofwhichnetworktheyarefrom(Visa,MasterCard,AmericanExpress,etc.),howmanycreditcardsdoyoufeelistheop6mumnumberpeopleshouldown?Q.Intotal,howmanycreditcardsdoyoupersonallyown?(Creditcards–allowsyoutocarryabalancefrommonthtomonth)Base:Totalrespondents(n=1204)

Detailed Findings Background, Objectives, & Methodology Appendix

DetailedFindings─Costco─

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Detailed Findings Background, Objectives, & Methodology Appendix

CostcoPaymentMethods›  Costcoshoppersgenerallyusethesameformofpaymentevery6metheyshopatthewarehousestore.

›  WiththechangefromAmextoVisacomingthismonth,manyoftheCostcoshopperssurveyedan6cipatechangingtheirmethodofpayment.

›  Thebiggestchangewillbeanincreaseintheuseofcreditcardsfromlessthanhalftoovertwo-thirdsofmembers.

›  AlthoughCostcoAmexcardholdersarebeingswitchedtoCostcoVisacards,significantlyfewerplantousethenewCostcoVisacardthenusedtheirCostcoAmexcardwhenshoppingatCostco.

CurrentlyPay(allmethods)

CurrentlyPayMostOLen

ExpecttoPay(allmethods)

Debitcard 49% 44% 42%Totalcreditcard 44% 40% 70%↑CostcoAmex/Visacard 29% 26% 22%↓OtherAmex/Visacard 16% 14% 55%↑Cash 23% 8% 18%↓Check 13% 8% 10%CostcoCashcard 1% - 1%

Q:WhenyoushopataCostcowarehousestore,howdoyoupayforyourpurchases?Q.Howdoyoupaymostoden?Q.HowdoyouexpecttopayforyourpurchasesatCostcobeginningJune20?↑↓Significantlyhigher/lowerthanCurrentlyPay(allmethods)95%confidencelevelBase:PastthreemonthCostcoshoppers(n=531)

Detailed Findings Background, Objectives, & Methodology Appendix

Appendix─ProfileofRespondents─

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Appendix Background, Objectives, & Methodology Detailed Findings

CardOwnership

Averagenumberofcreditcardsowned 2.5

Averagenumberofdebitcardsowned 2.1

AnyVisacreditcard 67%

Anydebitcard 59%

CostcoAmericanExpresscard 7%

Age

RespondentProfile

13

63%

33%

Male

Female

29%

29%

38%

4%

65andover

55-64

35-54

18-34

ShoppedatCostcopast3months 44%

Gender

Appendix Background, Objectives, & Methodology Detailed Findings

Base:Totalrespondents(n=1204)

TechnicalAppendix

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Appendix Background, Objectives, & Methodology Detailed Findings

SampleReliability

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Appendix Background, Objectives, & Methodology Detailed Findings

SampleSize 10%or90% 20%or80% 30%or70% 40%or60% 50%1,000 2 2½ 3 3 3

800 2 3 3 3½ 3½

500 2½ 3½ 4 4½ 4½

300 3½ 4½ 5 5½ 5½

200 4 5½ 6½ 7 7

100 6 8 9 9½ 10

50 8 11 12½ 13½ 14

FindingsbasedonasampleofNavyFederalmembersaresubjecttosomeerror.Thefollowingtableshowstheapproximatesamplingtolerancesforvariouspercentageresultsatthe95percentconfidencelevel.Forexample,ifweconsideraresultof60percentbasedonthetotalsampleofmembers(N=XXXX),wecanbe95percentsurethatthetrueresultiswithintherangeofthreepercentagepointsaboveorbelowthesampleresult(thatis,withintherangeof57%to63%).Thepossiblesamplingerrorisgreaterwhenevalua6ngpercentageresultsforsubgroupsofthetotalsample.ApproximateSamplingTolerancesforSurveyPercentageatorNearTheseLevels

SampleComparisons

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Appendix Background, Objectives, & Methodology Detailed Findings

Asta6s6caldifferencebetweengroupswithinanyonesamplemustalsobeaminimumsizetobesignificant.Thetablebelowisaguidetotheapplicablesamplingtoleranceswhencomparingresultsforsubgroupsofthetotalsample.•  Forexample,intwoseparatesamplesof500,ifanobservedpercentagedifferenceis6ormorepointsatthe50%results

area,thechancesare95in100thatitisatruedifferenceandnotduetochancealone.

•  Intwoseparatesamplesofunequalsizes,e.g.,500and100,apercentagedifferenceof11pointsormoreatthe50%resultsareawouldhavetoobservedbeforewecouldbe95%certainthatthedifferenceistrueandnotduetochancealone.

DifferencesRequiredforSignificanceatorNearThesePercentageLevels

SizeofSamplesCompared 10%or90% 20%or80% 30%or70% 40%or60% 50%1,000and1,000

750500100

3336

4448

4459

45510

45510

500and500300200100

4466

5679

67810

67811

67811

300and30020010050

5579

67912

781014

891115

891115

200and20010050

679

81012

91114

101215

101215