Cardholders who are fond of collecting points for free gas or airline tickets may find a new rewards scheme interesting.
Faced with increasing delinquencies, rising charge-offs, and looming tougher restrictions, card companies are set to introduce a new version of their rewards programs. Most banks and card issuers are looking for ways to cut back their losses. In order to achieve these, card companies are scaling back rewards programs.
Previous offers of points that do not expire can soon become a thing of the past. Even simple perks like free air miles can soon disappear. Fortunately, though, card issuers have thought of a new way to continue giving out rewards to loyal customers without losing more money.
Instead of giving away individual reward types like free plane tickets, electronics, or gas, card issuers are expected to award points that can be redeemed for a number of rewards.
Major card companies believe that the new rewards "platforms" will allow cardholders to have more options when dealing with accumulated points. Under this new scheme, points can be redeemed for different perks like free trips, household appliances, or cash rebates.
In the past, card issuers offered special cards linked to broad-based rewards programs. Nowadays, they are starting to open up other card types to the programs in an effort to attract more customers.
Credit card specialists say that the move can potentially save banks and card issuers millions of dollars. Instead of multiple cards with various rewards schemes, card companies can link their different cards to a single rewards program.
Experts also point out that banks are starting to realize that they do not need more cards in the hands of Americans unable to pay their debts. Instead, they say, card companies are looking forward to consolidating their existing cards. One way to proceed with consolidation would be to place several cards onto a single rewards platform.
There is, however, a downside to the broader platform scheme. Analysts say that while the new rewards program can offer clients more options, the actual savings and earnings are significantly less than regular rewards programs. By combining the different rewards programs into a single platform, they say, banks will spend less for more expensive perks.
Because of this, experts say that cardholders looking for specific perks like free gas or airline tickets should consider cards with specific rewards. Before even thinking of the advantages of a rewards card, however, consumers should make sure they have no outstanding balances. Having unpaid dues can mean higher interest rates, making any reward essentially useless.
