Are You Getting Shortchanged? The NAD Examines “Cash Back” Advertising Claims

In a recent case brought by Discover Financial Services LLC (Discover) against Chase Bank USA LLC (Chase), the National Advertising Division (NAD) recommended that Chase discontinue or modify certain advertising claims relating to cash back offerings under the Chase Freedom credit card.  (Chase Bank USA, N.A. (Chase Freedom Reward Card), NAD Report No. 5555 (Feb. 19, 2013)). In the dispute, Discover challenged the following representative claims made in connection with the Chase Freedom credit card cash back program:

  • “Your cash shouldn’t jingle in your pocket. . . Don’t get shortchanged.”
  • The purported implication that the Chase Freedom card is superior to the Discover card.
  • The purported implication that Chase Freedom card rewards accrue as points.

Your cash shouldn’t jingle in your pocket” and “Don’t get shortchanged” Claims

 Discover argued that Chase's “Your cash shouldn’t jingle in your pocket” and “Don’t get shortchanged” claims disparaged Discover’s cash back rewards program as cheating customers out of rewards.  Discover argued that Chase’s reference to Discover in its advertising was disparaging.  Discover also argued that Chase could not substantiate the claims because Discover cardholders earn cash back for every purchase and can take advantage of cash back earning and redemption options.

Chase defended that Discover’s cash rewards program is inferior to Chase’s program.  Chase argued that the “shortchanged” claim was merely a reference to Discover’s 0.25% cash back rate on the first $3,000 of ordinary purchases which Chase compared with its assertion that its Freedom card provides its cardholders a full 1% cash back on their purchases.

The NAD concluded that Chase’s “Don’t get shortchanged” claim was not linked in any meaningful way to Discover’s 0.25% claim.  Rather, the NAD found that the “short changed” claim echoes the main message of many of these advertisements, which is that the Chase Freedom card is superior to Discover as a general matter—not just due to its higher cash back rate on the first $3,000 of purchases.  Because this broad superiority claim was not substantiated, the NAD recommended that Chase discontinue the “don’t get shortchanged” claim, as well as the “Your cash shouldn’t jingle in your pocket” claim. The NAD also recommended that Chase “discontinue the use of any visuals . . . in the context of the challenged advertising convey a message of overall superiority as to Discover.”

Omission of the Fact that Chase Freedom Rewards Are Earned As Points and Not “Cash"

Discover also challenged that Chase’s advertising failed to disclose that Freedom credit card holders earned points and not “cash back” as advertised.  Discover argued that this is a material omission based on research showing consumers disfavor points relative to cash back programs.

Chase countered that its Chase Freedom card is a “cash back” card regardless of whether its cardholders also have other redemption options. Chase noted that cash or cash equivalents constitute the vast majority of rewards redeemed by Chase Freedom cardholders. Additionally, Chase argued that Discover had structured its own cash back program so that cardholders have an incentive to choose gift certificates over cash.

The NAD agreed with Chase on this point, finding that the Freedom card does not lose its status as a “cash back” card simply because its cardholders also have the opportunity to redeem their rewards in other forms (such as points, miles, etc.).  The NAD found flaws in the cited consumer surveys and concluded that consumers are likely to think of earning rewards in relation to what they actually receive, regardless of how a credit card issuer chooses to label the “currency” of these unredeemed rewards.

Significance of Case:  

The NAD’s opinion once again reminds advertisers that all express and implied advertising claims must be substantiated, especially when the claims identify a competitor and can be subjectively interpreted.  Keep in mind that this is true even for claims that an advertiser did not intend to make.  In addition, the decision provides guidance that can be applied beyond the credit card industry to the advertising of consumer rewards in any consumer loyalty/membership program.

To read NAD’s press release about the decision, see