Why Credit Card Companies Are Giving Money Away — and How to Get Some

The generosity of credit card reward programs has been increasing noticeably in the last year or so. A fact that has not escaped the notice of industry observers:

“Credit card companies are ramping up their rewards offers — meaning that there’s never been a better time to maximize the cash and perks you’re getting.
“We’re seeing higher rewards than ever. Issuers are really eager to acquire new customers and hold on to their current ones,” says Matt Schulz, senior industry analyst at CreditCards.com.”

The article provides several examples, from across the product spectrum:

“The bonuses for new applicants can be eye-popping. In November, Chase permanently increased its introductory incentive to 50,000 points, awarded after new cardholders spend $4,000 in the first three months. This month, American Express started offering 100,000 bonus points on its Hilton HHonors Surpass Card for cardholders spending $3,000 in the first three months. The offer is its highest ever, according credit card expert The Points Guy, but expires on May 4.

The love is being spread beyond the highest-tier cards that target affluent travelers with perfect credit. Two secured credit cards — designed for Americans with poor or no credit — are offering cash rewards, an unprecedented move.

The secured Discover it Card offers 2 percent cash back on gas and dining and 1 percent on everything else. SunTrust’s secured credit card is similar, giving 2 percent back on gas and groceries and 1 percent on all other purchases.”

Obviously, the motivating factor here is self interest not generosity, as the article notes:

“In the last week, Bank of America, Wells Fargo, Citigroup and JPMorgan Chase all reported that their trading and investment-banking revenue got hammered in the first quarter. Their consumer lending business lines, which remained steady or increased, softened the blow.

“Banks have been under a lot of revenue pressure in other areas and credit cards are profitable,” McCracken says. “Consumers are improving financially and this has led issuers to be able to extend more credit to those who in the past weren’t capable of handling credit.”

Overview by Alex Johnson, Credit Advisory Service at Mercator Advisory Group

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