Creditnet News Story
Reason why some rewards programs are expanding? Profit
Tuesday, March 16, 2010
By William Davis
Card companies are trying to encourage customers to use their credit cards with expanded rewards programs.
In the face of new credit card laws, some companies are expanding their rewards programs in order to entice people to use their cards.
A recent report from CNNMoney noted that there are a number of reasons why companies that make credit card offers are increasing the benefits associated with their rewards programs.
"First, using a reward card builds loyalty," the news organization said. "Second, the people who use reward cards typically aren't the folks at risk of defaulting."
Of course, profit is another big reason why card companies are trying to get consumers to break out plastic when making purchases. Through the Credit Card Accountability, Responsibility and Disclosure Act, lenders stand to lose profits as they are limited with regard to fees.
However, interchange fees are not regulated by the legislation. Through these fees, card companies charge retailers for each transaction made with a credit card. By increasing card use, card companies can increase the amount they make through these fees.
Retailers have noted that, in the end, the additional costs associated with doing business with credit cards will be passed on to consumers in the form of higher prices for goods.
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