Having kept themselves on the straight and narrow for a couple of years and having pruned their list of credit card customers, the card companies are beginning to want more again. Looking for new customers, they are trying to win them back with all kinds of offers – with credit card rewards. People all over the country are finding offers in their mailboxes every so often now. There are so many rewards cards on offer now that every company is trying extra hard to come up with a scheme that will stand out. And customers are responding just as enthusiastically too.
So the credit card rewards are making a comeback – eight out of ten credit card offers for the last three months were for rewards cards – most of them for cash rewards. In a recession, cash-back is attractive like nothing else. People get these cards, and they appreciate them so much they tend to stay loyal to the card company. When people walk around with five or six credit cards in their wallets, every credit card company wants their cards to be the one that sees the most use. If you get a new card and you start buying stuff with it right away, they even give you bonus for it. Chase for instance offers you $ 100 reward if you spend $ 500 each month for six months. So is just about everyone able to snag credit card rewards such as these?
Of course, the card companies are still pretty wary after having seen thousands of defaults over the last couple of years. They only offer good deals such as these to people who have good credit. They are only willing to bet on people who they feel will use their credit cards a good deal and pay their bills. Why do credit card companies like to issue rewards cards? Does it encourage spending? When studies compare the spending habits of credit card users who get cash rewards with users who don't get cash rewards, they find that cards with rewards usually get higher unpaid balances and higher spending. Not only that, they find that when they introduce a cash-back reward on an old card that is quite unused by its holder, that 10% of credit card holders start using those cards right away. Just a 1% cash-back reward gets people to spend more and then hold higher balances on their cards. To the credit card issuers, it's just a very profitable way to trick people into using their cards.
So what do you need to do to get the best deal? Make sure that you read all the terms and conditions. Many of these cash-back offers aren't as simple as they appear on the surface. Many of these cards will limit how much cash you can get back. The Chase Freedom Card for instance, makes sure that you can't ever earn more than $ 75 every three months. The Discover More card tops out at $ 800 every quarter. You also need to be aware of what kinds of purchases they offer you cash-back rewards on. Sometimes it'll be movies and restaurants; Sometimes, it will be only gas. Remember, you need to make sure that you know how much you have to spend before the program kicks in for you. If you like shopping at warehouse stores for the best deals, most cards don't like those. If you default on a payment two months in a row, you'll forfeit all your rewards. It's just a complicated business. But people seem to lap it all up. Just as long as they are careful.