Credit card users may be noticing some alarming trends with their current reward credit cards.
Not only may consumers see their interest rates go up and their credit limits go down but the perks that originally lured them to sign up for a particular card may no longer be as enticing as their original offer.
The first batches of reward declines were linked directly to the recent fuel prices spikes. The high fuel prices forced American Express to reduce the amount of incentives it offered consumers who held the Simply Cash Business Card. In July AMEX reduced the gas back purchase reward from 5% to 3% and capped the gas expenses that qualify to $12k annually.
More recently, in direct correlation to the credit crunch, consumers can expect cutbacks in opportunities to earn points from ones’ rewards card. The Chase Freedom card used to offer triple points for specific category purchases but recently reduced it to a one point to one dollar spent ratio.
Joe Ridout, a spokesman for Consumer Action in San Francisco explains that “the bank picks up an interchange fee for that transaction from the merchant” for every signed credit card transaction. Ultimately the bank then uses those fees to offset the cost of the reward program. With cutbacks in consumer spending, there is less money to be spent on the promotions.
Credit is becoming increasingly difficult to secure and consumers are waking up to the realities of their contribution to the current financial crisis. Declines in consumer spending are the current trend as well as rising card holder default rates. These two factors are ultimately influencing the profit margin of the credit card business and the bottom line of reward programs in general.
Only time will tell if this is a true trend or just a couple of isolated incidents. Either way, credit card holders should be analyzing and managing their current plastic portfolio to make sure they are still getting the most rewarding options available to them.