travel rewards programs credit cards

travel rewards programs credit cards : We all see the commercials, take out this credit card and get a free flight anywhere in the country or take out that card and get money off vouchers for your favourite restaurant. Some even offer to give you money back for everything you spend on the card! Being rewarded to spend money on a credit card seems great doesn’t it??

However it isn’t all good. Recent statistics from the Federal Reserve Bank indicate that signing up to a credit card rewards program encourages people to spend more. While it may be the case that cardholders just use their reward card to pay for things more often instead of cash, the average credit card balances still increase compared to “regular” credit cards.

These statistics from the Federal Reserve Bank come from a recent 2 year study of the spending of over 12k accounts belonging to people who enrolled on a credit card rewards program. In just 3 months, the average account saw an increased spend of $70 a month and going up to $80 for the first 9 months.

Increased spending was not the only thing which was noticed on the majority of reward accounts. The average debt carried on a credit card account increased by $200 for the first 9 months. Although it does need to be considered that a large proportion of these increases were attributed to balance transfers from other credit cards so as to benefit from their other cards.

The impact of the rewards programs differed depending on the individual’s attitude towards credit cards. For those people who always pay their balance in full at the end of the month spent almost 3 times as much more per month than those who always have a balance on their credit card.

Generally the study found that people who enrolled on a credit cards rewards program increased their spending. Increased spending in turn leads to higher credit cards balances and it is here where the credit card companies make their money.

Sure 1% cashback on all your spending sounds good, but just think how much you will be paying in interest on a balance large enough to notice the extra cash!

Credit card companies are increasingly turning to rewards programs to target new customers, with 80% of new card offers being related to some kind of rewards program. In the end, the credit card companies are the ones who will be rewarded the most.

Some of the most popular credit card reward programs include the Chase Freedom Visa (offering 5% cashback on your spending), Capital One VentureOne Rewards Credit Card (allowing you to collect travel miles which will never expire) and the American Express Premier Rewards Gold Card (rewards you for travel related purchases and get you access to special cardholder events).

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