Are Credit Card Rewards All They Seem?
Recently the credit cards offering rewards programmes have increased. This increase is making many pay attention to how the programmes actually work. According to many credit card experts, the rewards credit cards are not all they seem. Despite the number of schemes offered the deals are poor, usually offering too little for the time and income needed to secure the awards. In fact many with rewards cards never reach the rewards as they find it too bothersome to try.
A new study was released regarding the use of rewards credit cards. It showed that a number of loyalty cards have increased from 122 from 2005 to 190 in 2008. This is a 50 percent increase; however, one in four cardholders will actually claim the rewards. The study showed that 1 in 4 in the last 12 months actually received an award.
This can be bad news depending on the card. Some loyalty programmes offer a time limit on the collection of the rewards, while others will let them accrue until the person has enough. The study looked at Sainsbury’s credit cards to find that 35 percent who had credit cards with rewards were offered less than 25 pounds when they did receive their rewards. 23 percent of the consumers questioned stated that they didn’t know how to get their rewards. 24 percent said that redeeming the rewards was too much of a hassle. The rewards can be redeemed by mail, internet or telephone when there is enough saved up. You still have to choose something that is within the reward limits and this is where it can get confusing. It is just easier to have the reward pay the monthly balance rather than try to redeem the cashback option, according to the research.
The schemes are definitely poor in value. You have to spend over 200 pounds to get the 1 percent cash back accrued to a high enough level to receive it. Sometimes the rewards that were researched were seen as false value. The rewards are often worth pounds and pence, but again it takes a great deal of time to get the points earned.
Sainsbury’s credit card with Nectar points is equivalent to 2 percent cashback on Sainsbury’s purchases. This would mean having to spend 100 pounds every week with the credit card to get 104 pounds worth of Nectar points each year.
The study is to offer a word of caution regarding the schemes. As it is seen a consumer must spend 100 pounds a week for the rewards with the Nectar card, which is pretty typical of other rewards schemes. If you can’t pay off the balance each month you are not any further ahead due to the high rates of interest. Before using the rewards cards consumers need to look carefully at how the points work. This may require a call to the credit card company for full disclosure that is not often seen on the internet or the paperwork you receive through the mail.
Understanding Credit Card Debt
When it comes to credit card debt, one of the most important things is to make sure that you understand what your credit card bills actually mean. Too bad the credit card companies make it next to impossible for people. Even worse, far too many in the United States and the UK lack the financial knowledge to even understand the terminology that is used. If you are sitting here asking someone to get me out of debt, then it is time you start learning about your debt help options.
The first and most popular form of debt consolidation is known as debt counseling or debt management. It involves using a third party to restructure your bills into an affordable payment. By doing so one can avoid late fees which will make paying off debt nearly impossible.
Another option is debt settlement or debt negotiation. This is a new type of debt management. By speaking to a debt consultant one can get information about filing bankruptcy and the costs of doing so. Both have disadvantages from a credit standpoint, so make sure to ask about these consequences.
If you would like to learn about the possible ways to pay off your credit cards fast with one of these plans, look online for an objective resource. One great site to go to is PayingPaul.com – the site about getting out of debt without “Robbing Peter”, or getting a loan.
Credit Cards Offer Ease and Flexibility
Over recent years credit cards in general have received a lot of bad publicity, and have been blamed for adding greatly to the UK’s personal debt mountain, with high interest rates and various charges being blamed for consumers falling into debt and being unable to afford their credit card repayments. Credit card fraud levels have also resulted in bad press for credit cards over recent years, and there is no doubt that many people have got themselves into a financial pickle as a result of overspending on their cards or failing to take care with their cards and account details.
However, one industry professional has recently stated that despite this bad press credit cards do still provide consumers with a very useful financial tool, offering ease, flexibility, and convenience, and enabling consumers to manage their finances more effectively. However, he also said that it was important for consumers to be sensible and responsible about using their credit cards and making repayments in order to avoid spiralling debt levels.
The official, from Sainsbury’s Credit Cards, stated: "A credit card is, despite press comment to the contrary, an incredibly flexible and user-friendly way of managing your finances. In terms of spending responsibly, if you’re looking to buy something for £1,000 - a piece of furniture…or a couple of white goods - this weekend…the card gives you the flexibility of making that purchase…and paying it off when you get paid."
He also said that the global credit crunch was unlikely to stop many consumers from spending money, which has been backed up by recent data that showed nearly half of consumers were not going to cut back on spending. However, an official from the British Banker’s Association said that whilst people spent more on credit cards in May repayment figures were lower than expected: "People spent more on credit cards, but repayment levels were lower than expected in May."