Credit card offers often come with enticing offers to lure in new credit card customers, especially around the holiday
season. Much like gifts, credit card offers come in all shapes and sizes. Nicely decorated and brightly colored credit card offers are send by postal mail, by email and advertised in local newspapers and on television in an effort to attract new credit card consumers. Each credit card has a unique spin on the rewards they offer, but there is undoubtedly a double edged sword that pertains to credit card rewards that many people don’t account for.
Type of Rewards
Go for the Incentive
Rewards have long been seen by society as incentives for good behavior. Good behavior as far as credit card issuers are concerned is consumer spending habits that make money for creditors; cardholders paying minimum balances, earning the card issuers handsome profits with substantial finance charges or other associated fees. Certain rewards are often provided to account holders who spend more over a predetermined amount. Card issuers typically benefit from most card approvals because once a card holder is approved for a card it’s highly likely that they’ll use the card, generating profits for the card issuer. The small rewards incentives are worth the high probability of profits for the card issuers.
Responsible Spending
Card holders that spend responsibly will probably not pursue a credit card offer just because of some glossy advertisement touting a 1% cash back bonus on airline tickets; rather the rewards are typically an after thought because they need the card, first and foremost. The less responsible card holders may sign up for a card simply to get a free toaster or some other low value incentive. Some people just can’t pass up these low value incentives and end up with massive debts they can’t afford from purchasing items they don’t need or even want.
Credit Card Marketing
Reward programs have been used by card issuers very effectively to advertise and promote their products and services. The goal of the rewards programs is to get users to spend money using the card in hopes of earning free stuff. The trap that some consumers fall into is thinking that the benefit of the reward may be greater than the potential consequence of using the card. Credit card holders who have mastered the art of responsible spending may benefit from some of the incentive programs offered. Credit card holders who have fallen into the trap of spending more than they can afford may find themselves enticed by the deals and spend just to earn rewards. The bottom line is that rewards programs are almost always a double edged sword, appearing as though their purpose is to reward good behavior when they really might just be reinforcing bad behavior. The outcome of any credit card reward program really depends a great deal on the cardholder and very little on the reward.
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