Credit cardholders will agree that shopping is beginning to pinch with firms charging higher interest rates and fees. However, if you are a frequent spender and a loyal customer of the company, you can benefit from the many reward programs to offset these costs.
For instance, Citibank has increased its reward points per dollar spent on its co-branded American Airline cards exclusively for “good customers”. Instead of receiving 1 mile for every dollar you spend, you now earn 1.2 miles for the same amount. JPMorgan Chase has done the same with its British Airways and Marriott cards with 1.25 miles offered for every dollar spent. Similarly, with the Freedom card from Chase, you can get cash back on some purchases, sometimes to the tune of 5 percent.
If these deals sounds too good to be true, rest assured that the credit card companies know what they are doing. Despite the fact that they seem to be losing money in these deals, reward programs actually help them in the long run.
A reward scheme increases loyalty, which means that the credit card company is assured of recurring revenue from the customer. And as you spend more to benefit from these deals, the credit card company makes more money from the merchant you buy the products from.
A loyal customer also presents good opportunities to cross sell other financial products of the company, like a trading account or some other loan. This means additional sources of revenue. By looking at your spending profile, they can understand the kind of products you will be interested in and then give customized offers to you which have a very good success rate. This saves the company a lot of marketing effort and expense.
Another important fact is that these reward programs are not for everyone. They are offered only to a select group of customers who have proven that they have a very low risk profile. If you default on your payments or delay them often, there is very little chance that the company would be willing to sign you up for a rewards program.
If you haven’t found a good deal on a card yet, you can procure a regular credit card and keep looking for new offers. Many great deals hit the market from time to time, and if you can grab one of them, you could benefit from it for a long time.