The longer you stockpile your points, the more risk there is that today’s challenging conditions in the credit card business start to affect reward programs for the worse
. The list of steps card issuers could take to help their profitability include adding expiry dates for points and making the terms for redemptions of travel or merchandise less favourable.
For one thing, credit cards seem to be losing some of their dominance as a preferred way to pay for things. The market research consultancy MarketSense Inc. does an annual survey in which participants are asked about their preferred way to pay for things. In 2011, 43 per cent chose credit cards, 40 per cent chose debit and 20 per cent went with cash.
While people expressed less of a preference for credit cards, they’re actually using them a lot these days. Credit cards became this country’s preferred way to pay for purchases by offering rewards that can be redeemed for travel and merchandise, or cash back. But a surge in card issuance and usage recently suggests a new driver for this line of business – households that need access to a handy, no-questions-asked way to cover financial shortfalls.
Banks charge fees to businesses for processing customer card payments and, in a slowing economy, these fees are more of a burden than usual. Businesses are now allowed to pass these costs on to customers, but we haven’t seen this kind of surcharging take hold as a trend. If this happens, you can expect card usage to decline.
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