Credit Card Rewards
Credit card rewards are advertised by credit card issuers to draw in new customers. These rewards programs change from time to time, as the credit card issuer tries to figure out the proper rewards and credit card incentives for the proper time and place. With the current economy and the troubled credit card industry, you’ll find that credit institutions are playing around with their rewards programs more than ever. Because of the slimmer margins than in previous years, many credit card issuers are tightening restrictions on their rewards programs, or otherwise looking for an edge in giving out credit card rewards.
Of course, creditors don’t want to look like they are being stingy with their credit card rewards, so I’ll try to point out some of the ways credit card companies are limiting their financial losses due to their advertised credit card rewards programs. It should be noted these methods are stricly legal and mainly involve making it harder to know how to collect on your credit card rewards, or making it a little harder to collect on your credit card rewards.
Types of Credit Card Rewards
Below are some of the most common types of credit card rewards. Search long enough and you’ll find all kinds of odd or remarkable credit card rewards in these programs. The first three mentioned are fairly common rewards, while the fourth and fifth may or may not be included in credit card rewards programs.
1. Gift Certificates – Perhaps the most common credit card rewards is a simple gift certificate that can be reimbursed at select locations. These gift certificates might be issued automatically through the mail or might require you to apply for them through customer service when you qualify.
2. Rebates and Cash Back Incentives – Similar to gift certificates, the cash back incentives allow you to apply for a rebate on some purchase if it qualifies for the credit card rewards program. This is a valuable incentive for credit card companies, because a certain percentage of customers will forget to apply for the rebate and therefore the credit card issuer doesn’t have to pay off a certain percentage of these rewards.
3. Frequent Flyer Points – One of the most common credit card rewards you’ll receive. Like an airline’s frequent flyer programs, you receive this credit card reward when you have built up enough points. Generally, you receive a free ticket to fly anywhere within a certain radius or country. Most credit card rewards programs will advertise frequent flyer miles,
4. Cash Advances – Roughly synonymous with “payday loans”. A creditor gives a cash advance on a very short-term loan. The debtor agrees to pay a certain large fee on the next payday. Credit card companies will offer cash advances to customers and sometimes the money transferred are included in the rewards program numbers. You should remember that many rewards program do not figure cash advances into their rewards total.
5. Balance Transfers – Like cash advances, these are often not figured into your rewards program, though some credit companies do figure these into your running rewards program tally. A money transfer is simply when you transfer money from one account into another, like when you transfer money from your credit card account to your bank account, or vice versa. These tend to involve bank accounts, other credit card accounts or trading accounts at financial institutions. These often have transaction fees. In this case, they might qualify as part of a rewards program.
Credit Card Rewards Loopholes – Credit Card Rewards Scams to Look Out For
Sometimes, the credit card issuer will offset the cost of their rewards programs by using credit industry tricks, so here are some of the tricks to look for. These are perfectly legal, but the credit card institution assumes that most customers won’t take notice of the clever bookkeeping, and won’t realise the customer is either paying for the customer rewards or being discouraged from collecting from the rewards program.
1. Customer Service Hassles – A lot of credit card rewards programs require you to go through the credit company’s customer service to collect on the rewards. This is an extra hassle, and many customers would prefer to avoid the hassle altogether than actually collect on their credit card rewards program. Those who don’t mind or are willing to deal with the hassle get the full benefits of the rewards program, while those who don’t get no rewards program. Credit card companies generally know about what percentage of their customers won’t get reimbursed due to customer service hassles and figure this into their numbers.
2. Hiding the Rewards Information – One very common tactic is to hide the information on the credit card rewards program, so some customers never know exactly what rewards they are receiving or how to collect on those rewards. Unfortunately, hiding your rewards in fine print is perhaps the most common way credit companies discourage customers from collecting their rewards. This is even common on the rewards program website, or the part of the creditor’s website that deals with the rewards program.
3. Increased Card Fees – To pay for the roughly 1/4th percent to 2 percent of credit profits that rewards programs generally cost the credit institution, the big credit card issuers have increased the fees to use their cards. In a way, these increased credit fees mean you are paying for the rewards program.
4. Encouragement to Collect Lesser Rewards – Some credit issuers encourage customers to collect lesser rewards than go through the hassle of collecting the advertised large reward. For instance, free plane tickets from frequent flyer programs are expensive to administer, while gift certificates are less expensive to hand out. Also, credit institution gift certificate rewards are not the same as gift cards given out by other institutions. In many U.S. states, if you don’t use a gift card, that leftover money goes to the state treasury. In the case of credit card issuer gift certificates, if you don’t use the gift certificate, that money doesn’t go to the state treasury, but is retained by the credit institution.
This entry was posted on Wednesday, May 27th, 2009 at 4:08 pm and is filed under Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.