On March 10h, Credit-Land.com has released its 2011 Industry Outlook Report that includes updated Cash Back Credit Card Rewards Survey. The report notes that over 40% of cash-back credit cards offer a one-percent reward as part of their loyalty program and forty-four percent of cards offer cash-back with the first dollar charged.
Regulations brought about by the CARD Act of 2009 that were perceived by main stream media to steer consumers from cash-back credit offers, have had little to no effect on consumers’ use of cash-back credit reward programs.
“It’s the epitome of using credit on your own terms. You’re getting something for nothing,” said Rupert McAllister, senior financial analyst at Credit-Land.com. And the offers are improving. Approximately 41% of cards offer introductory bonuses designed to get consumers purchasing. Citi Forward cards offers 6000 bonus points after $250 spent, and the U.S. Bank FlexPerks Cash Rewards Visa card offers consumers three-percent cash-back on gas purchases made during the first 90 days.
While consumer use of cash-back credit cards is increasing, these types of credit cards are not for everyone. “Cash-back and other reward credit cards provide an added bonus for consumers who are disciplined in their spending – but it won’t offset sloppy spending or overspending,” McAllister said. “Receiving cash back won’t make you any more financially disciplined. You have to look at yourself in the mirror and see if you are or are not” overspending each month.
Paying the full principal balance each month is the best way for a consumer to really profit from their reward points. “If you carry a balance it can wipe out rewards. It’s important to watch interest rates and refrain from overspending,” McAllister advices.
Spend time analyzing your current financial situation to see which card works best for you. If you charge a lot of purchases on your credit card each month, then a card with an annual fee and a lucrative cash-back program might be right for you, but if you are not a big spender, you should probably avoid a card with an annual fee. The good news is that it’s rare to find a cash-back credit reward program that comes with an annual fee. More good news is that the reward points usually don’t expire. Half of the cards surveyed didn’t have an expiration date, and 31 percent of cards give cardholders five years to redeem rewards.