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Reduced rewards and increased interests in retail credit cards

[Monday, November 15th, 2010]

Reward programs are now becoming more unfriendly with consumers today. Most retail credit card issuers are purposefully making the reward program requirements harder for consumers to meet. Moreover most retail credit card issuers are now cutting back their credit card reward programs.

Aside from reducing credit card reward programs, retailers are also changing the face of their annual percentage rates (APR). According to a survey conducted most retail credit card providers now have higher annual percentage rates (APR) compared to what they had in 2009. The survey also revealed that for some retailers` annual percentage rate has now gone up to 23 percent and higher. With this increase consumers are advised to be more concerned about paying for their purchases as soon as possible.

Reward programs of retail credit card issuers are what most people are looking forward to for some savings however now that annual percentage rates have increased in most issuers, it is more likely for the discounts and savings reward programs can provide consumers to be negated by the increased in interest rates if consumers carry balances.

According to experts this upward movement of annual percentage rates experienced nationwide is a result of the confluence of three main factors. One of which is the recession that hit the entire world economy. This untoward event created more cases of charge-offs since cash-strapped and laid-off consumers cannot keep up paying their bills. Another factor that is also considered to be responsible with the increasing number of charge-offs is the credit crisis. These two major factors also made people avoid making use of their retail credit cards and avoid spending their cash too much. The third factor experts see as a major influence on the retail credit card issuers` current situation is the CARD Act.

Retail credit card issuers experienced significant decrease in their profitability mainly because the CARD Act is directly putting defined limitations on the fees retailers can collect. In turn retail card issuers had to raise their rates and lower their reward programs.

Credit card rewards were primarily introduced in the market to make people use their cards more and more every time. Each use of their cards correspond to specific points consumers can earn and specific number of points can be exchanged to some repayment like travel tickets or discounts and rebates.

However now that credit card rewards are having higher qualifications lesser people might be encouraged patronizing credit card use. Moreover more and more people are starting to limit their credit card utilization and even cash spending in response to the recently experienced economic turmoil.

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