Losing Credit Rewards

New Bill Warns: Watch out for Your Credit Card Rewards!

As the credit card industry's new regulations are coming into force, customers begin to feel their effects little-by-little. And while the positive changes, such as the elimination of unfair penalty fees, hidden charges and "any time, any reason" hike of the interest rates are yet to come, some unfavorable aspects are already threatening the wellbeing of cardholders.

What shoals come with the new credit card laws and do the laws really care about credit consumers? Are their disadvantages meaningful enough to take the back track? Well, if you are a rewards-oriented cardholder, one of the latest bills is certainly out of your line.

One of the bills introduced this spring threatens cardholders' most valuable virtue - credit card rewards. The bill proposes to cap the fees that merchants pay to card companies, such as Visa and MasterCard, to process credit card payments.

At first sight, it is unclear how this regulation might affect cardholders, especially as they are already paying extra which is included into the item price and meant to cover merchants' fees. But in fact, only part of this extra goes to cover the merchant's processing fee - the other part is intended to make up for rewards.

Now, follow the thought. If the merchant fees are capped, the price of the purchase might easily fall. But on the other hand, if the fees are capped, card issuing companies will lose a source of paying for rewards programs. The result is evident and it is reducing rewards offers.

The new regulation will be especially painful for customers who regularly take advantage of point rewards, airline miles, cash back and discounts. A 2006 survey by Harris Interactive, an American market research firm that specializes in public opinion research, shows that these strapped for rewards customers make up about 60% of all cardholders entitled to rewards. The other 40% hardly ever redeem their rewards.

Now that the bill threatens to bereave the privilege of earning rewards itself, these 40% are growing uneasy, realizing what great opportunities they are going to lose. However, while the new legislation has not been accepted yet, you may resort to some credit card smarts which will help you benefit from card use.

• Make list of retailers that offer discounts if you pay for goods with your credit card. Online purchases at such renowned retailers as Kmart.com and Target.com which work with Visa open up lots of saving opportunities through their discounts programs.
• Such categories of retailers as travel, gas, medicine and movies allow customers to shop and earn up to 5% cash back depending on what card company they team up with.
• Use the tools that offer the automation of rewards redemption. Automatic rewards would be of use to cardholders that forget to redeem their points or to credit their cash back earnings to their accounts. Thanks to the automation, rewards are paid out to you on a set schedule which is determined by the card company or yourself.

Hurry to make use of these tips and you will squeeze out all the benefits related to reward programs that your credit company has still on offer.