Wells Fargo is moving into the rewards space (AXP, WFC)

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Wells Fargo and Amex are partnering to upgrade the Propel card, a credit card that they stopped taking applications for in February, by adding new rewards and bonus offers, according to Bloomberg. Current Propel cardholders will be converted to the upgraded card and applications for new cardholders will be taken July 16.

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The upgraded Propel card has a valuable rewards proposition. Cardholders have varied opportunities to earn points.The Propel card offers three points per dollar on purchases made for dining, transit and travel, and streaming services like Hulu, Netflix, Spotify Premium, and Apple Music, among others. And it offers one point per dollar on purchases made on everything else. These points can be redeemed for cash, gift cards, or travel.

The ability to earn points on every purchase — particularly recurring monthly subscription purchases — is a valuable offering that could resonate with a wide range of consumers. Providing popular rewards could enable Wells Fargo to see high adoption: 78% of consumers ranked cash back as their most preferred reward feature in 2017, compared with 69% the previous year, according to a TSYS study. Gift cards and travel are the next most popular rewards, so Wells Fargo’s card offering is in line with what consumers are looking for in a rewards offering.

There’s a signup bonus and no annual fee. The card has no annual fee, which could make it popular with consumers looking for rewards without wanting to spend a lot on an annual fee. It’s rare for cards that offer strong rewards to also offer no fee; many nonpremium rewards cards come with a $95 annual fee after the first year. And other cards that offer cash back for transit purchases, which is an uncommon category for earning points, come with annual fees.

The Propel card also offers a 30,000-point bonus, which equates to $300 cash, after cardholders spend $3,000 in the first three months of opening the card — which is a higher bonus spending target than some other low-fee rewards cards. But overall, with no annual fee, and the ability to easily accumulate points, the upgraded Propel card can be positioned competitively compared with similar cards.

Moving deeper into the rewards space could be a good move for Wells Fargo. Offering a rewards-heavy card can be a good move for the firm as it continues to rebound from its 2016 scandal, because rewards cards can be strong customer acquisition tools.

With no fee, it’s likely that the upgraded Propel card will see significant adoption and engagement given the wide range of opportunities cardholders have to earn points. But providing robust rewards, especially with no fee, can be expensive for issuers, as demonstrated by Chase’s recent decision to cut some of the rewards from its premium Sapphire Reserve card.

It’s important for Wells Fargo to achieve a balance between offering valuable rewards that will drive card adoption and usage, while still allowing its offerings to be cost-effective. This card can ultimately increase Wells Fargo’s total payment volume, and onboard customers that the firm could upsell to more lucrative offerings in the future, like premium cards.

Credit card rewards have become so popular in the US that issuers capture headlines just by launching a new rewards card. And with consumers now caring more about the type of rewards being offered than any other card feature, competition to offer the most lucrative and attractive rewards has intensified dramatically.

But it’s also important to note that offering such high-valued rewards comes at a price — Chase’s Sapphire Reserve card ended up reducing the bank’s profits by $200 million to $300 million in Q4 2016, according to Bloomberg. And as costs continue to rise, issuers will have to adjust to this new landscape by leveraging technology and partnerships to keep consumers engaged without sacrificing profits.

Ayoub Aouad, research analyst for Business Insider Intelligence, Business Insider’s premium research service, has compiled a detailed credit card rewards explainer that:

• Identifies the costs associated with offering rewards for issuers and how they have increased over time.
• Details why credit card issuers continue offering high-valued rewards.
• Analyzes how the industry has evolved since 2011
• Explores how credit card issuers will advance in order to continue reaping the benefits of offering rewards without assuming increased costs.