Credit Card Reward Programs
Loyalty programs have been around for ages in many forms. Just ask grandma about those little green stamps that grocery stores and gas stations used to give out. From childhood on, humans are conditioned to value rewards. Marketers know that the lure of a reward can have a powerful effect on consumer behavior. In the highly competitive and lucrative business of credit cards, reward programs are growing faster than ever. Are credit card reward programs really a good thing for consumers?
History of Credit Card Reward Programs
Not so long ago, it was hard to get a credit card. Many stores and service providers did not accept credit in any form. While credit cards have become steadily more popular since the 1950’s, it was not until the 1980’s that banking deregulation made it possible for banks to charge basically whatever they wanted for credit card interest rates. The convenience of credit became the fuel of our economy. It didn’t take long for marketers to figure out that credit card rewards spurred sales and built brand loyalty.
Airlines and Credit Card Reward Programs
Along with banking deregulation, airlines were deregulated in the 1980’s. Competition spurred cheap fares and savvy marketers began the wildly popular airline miles reward system. Credit card reward programs built around airline miles were quick to follow. Other credit card reward programs, such as the Discover® card were aimed at rewarding heavy users with cash back.
Credit Card Reward Programs Today
It is estimated that over 60% of all credit cards used in the US today are connected to rewards programs. That number is growing. Although miles and cash back are still big favorites, everyone from gasoline stations to pro sports teams have credit card rewards programs in their marketing mix.
Shopping Credit Card Reward Programs
Assessing whether any particular program is a good deal depends greatly on personal spending habits. Not all rewards programs are free. Like everything else with credit cards, the devil is in the details of the offer. The best rule of thumb is to determine if a card will reward you for doing something you will do anyway.
Credit Card Reward Programs that Work
Are you a road warrior who travels extensively? Can you keep all the airline miles you are accruing for personal use? Do you make your own travel arrangements and get reimbursed for them? An airline credit card reward program is a hands-down winner, even though there is an annual fee to have this card. For the average traveler, it is not a good deal. Addicted to a certain catalog clothing store and buy everything from underwear to overcoats, year after year? Yes, a credit card reward program that gives special discounts, free shipping and other perks is a very good thing.
When it comes to selecting a credit card, the last thing on the list should be the rewards it offers. Interest rates, fees and the protections the card provides are far more important. Every time a credit card is used, it’s a loan. Shop for the loan terms first and the rewards second. By all means, if there’s a reward out there that makes sense in your life, take it and enjoy.
Watch the video related to credit card rewards
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Help answer the question about credit card rewards
How can I get a credit card with rewards when I have bad credit?Hi. My wife and I both have terrible credit, and are looking for a credit card with rewards such as cash back or sky miles. We use our visa cards that are tied into our checking accounts so much that it is a waste to not get rewards, but it is hard to get rewards with bad credit. Any advise?
January 3rd, 2009 at 11:51 am
citi driver's edge options gives 6% on gas, grocery,drug store for first year — after first year it is 3%. The cash can be only redeemed for auto repair/services or buying new car. It also has 1 cent per mile you drive – not a bad deal in this age of high food/gas prices
second one is chase freedom — gives 3%casback in top 3 categories. If you are patient to wait till you accumulate $200–it gives additonal $50 as bonus — equivalent to 3.7%cashback
January 3rd, 2009 at 1:01 pm
When I use my Emigrant Direct credit card I get cash back deposited into my online savings account I have with them. The interest rate on the savings account is great, no fees or minimum balance. No annual fee for the card either.
January 3rd, 2009 at 11:15 pm
I wasn't aware that these fees got charged back to the vendors. I definitely do not think that it's fair for them to increase your transaction fees just because their customer has a rewards card.
There is a bill right now that is in the House to require card companies to negotiate their rates with vendors, rather than having a set non-negotiable fee. I haven't read the bill, so I don't know whether I agree with it's text. However I do agree that something has to be done. I'd be in favor of requiring the card companies to charge the same fee to all its vendors, otherwise, I expect large retailers (wal-mart for instance) would be able to negotiate a much lower rate with the credit card companies than the small business owner could, based on volume.
January 4th, 2009 at 6:48 am
January 4th, 2009 at 5:30 pm
It sounds like Card #1 is the American Express Blue Cash card. I'm quite familiar with that card's reward structure.
Assuming your monthly spending is even across the 12-month period, then you should go with Card #1 (AmEx Blue Cash). Here's why: Your average rewards for supermarket spending with card #1 will be 3% (i.e. (5% + 1%) / 2), while your average rewards for supermarket spending with card #2 will only be 2%. Your average rewards percentage on all non-supermarket/gas/drug spending for both cards will be 1%.
Note, however, that to really know the optimal card for you for certain, you should take into account your entire categorical spending profile (including gasoline spending, drug store spending, and any other special rewards categories with either card).
You might find that this credit card rewards calculator is helpful to you:
http://www.creditcardtuneup.com/
January 4th, 2009 at 8:38 pm
It's a reduction of a non-deductible expense so it isn't classified as income on a personal return.
If the credit card is used by a business, any reward program funds must first be used to reduce the interest expense claimed so that effectively makes it taxable as if it was income.
January 4th, 2009 at 11:44 pm
Citi PremierPass(SM) reward program enable cardholders to earn a point for each dollar spent for general purchases and a point for each three miles flown by a cardholder on any airline. It may include others who buy the ticket using the card.The points earned can be used for travel, products; gift certificates and the like. The most number of points that can be earned annually is 100,000. There is expiration if the account has no activity in every three years.
You may find a great Citi Premier Pass Credit Card Review here:
http://www.rewardcreditcardsite.com/travel-rewards-credit-cards/citi-premeir-pass/
January 5th, 2009 at 2:17 am
For those who have very good credit and have plans of taking advantage of the reward program, American Express designed a card for you, the Blue Sky Rewards.
What are the reasons why this card is simply for you? It has reasonable interest rate. You do not any annual fee to pay for. You can also take advantage of the 0% introductory rate for your purchases in six months time. It has to be made clear that the introductory rate for balance transfers only applies to those who initiate a transfer when applying online for the card.
The great thing about the Blue Sky from American Express, the credit card rewards program are amazing. There's no annual fee, low introductory rates, and free rewards program with no blackout dates or travel restrictions.
Other benefits offered by the Blue Sky from American Express include auto rental insurance, a Return Protection which credits cardholders with the maximum amount of $300 for purchases that are non-refundable in 90 days. This also includes a year end report.
You may find a great review here:
http://www.rewardcreditcardsite.com/travel-rewards-credit-cards/blue-sky-from-american-express/
January 5th, 2009 at 2:40 pm