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.