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There’s no shortage of credit card companies out there and the industry has evolved over the years in order to better compete for business. There was a time when placing a purchase on credit required a phone call to a representative and it took a long time. Of course this process has been sped to lightning speed. Credit cards are used all over the world for just about any purchase. From plane tickets to health insurance, or “seguro medico”, but rewards are the name of the game today.

Now the only way a credit card company is going survive is on interest rates. The only way they can do this is by getting your business so many credit companies have begun competing on the open market with different rewards programs intended to give consumers the added bonus of getting a little extra for their purchases.

Some of the plans in which many credit card companies include:

Frequent Flier Miles

This is a popular feature and has been employed by many different providers. With this program you can earn flier miles in a multitude of ways. Rack up miles with every purchase, flying around the country, and even when you simply sign up for the program. This might not be useful the vast majority of Americans given that not everyone needs to fly and if they do it’s not as frequent.

NOTE: It’s important to point out that you usually won’t be able to get reward miles on your card unless you’re purchasing a plane ticket through a sponsoring airline or at least an airline who’s participating in the program.

Gasoline Rewards Cards

This has been issued by many companies and has been one of the most successful campaigns in recent years. Gas prices have skyrocketed and they’re only getting higher.  Many people are struggling to fit their transportation needs into an already stretched budget.  This program rarely has an annual fee and you can usually earn a 5 percent rebate towards gas purchases at a sponsoring gas station and a 1 percent rebate at every gas station or purchases from anywhere else.

Cash Rebate Cards:

This is a newer plan on the market and offers participating customers to earn a percentage of their money back with a cash rebate. This percentage usually fluctuates concurrently with the price of the purchase. These cards, like most today, are protected from identity theft and there isn’t an annual fee for this program.

There are other programs out there but these are some of the most popular.  But it’s important to note that credit cards are a form of debt. They are often too easily relied upon in lieu of an emergency fund, or plain used to excess, and people end up losing a lot from the debt they’ve irresponsibly racked up. So if you’re not familiar with some of the rewards programs out there do a search on these, and others, to see if it might be beneficial towards your budget.

Do you use a credit card specifically for the rewards?  Why or why not?  What reward card do you have, and do you find your spending habits have changed as a result?

Guest Post credit card, rewards

Record Drop In Credit Card Usage

The Federal Reserve reported Tuesday that credit card usage & consumer borrowing (non-mortgage debt) has dropped at record levels.  Credit card spending fell at an annual rate of $7.8 billion, or 9.7%.  People are charging less and saving more.  That’s good news, right?

Lesson Learned?

In a vaccuum, decreased credit consumption is a victory in the battle against the bondage of debt.  Does that mean the Dave Ramsey’s and Suze Orman’s of the world have gotten through to the consumptive masses, and people are rejecting debt?  Hopefully, but studies show household debt decreases during times of recession and then, as creditors begin to make more credit lines available, consumers increase their credit card borrowing levels at the first sign that the economy is breaking out of a recession.

In fact, the reason the credit crunch is so huge during this recession, is because during the last recession (dot-com bust, 2001-2002), household debt actually grew because of low-interest rates and the break-out of credit card “teaser rates”.  So instead of a natural ebb & flow to credit availability, creditors have slashed credit card limits and increased minimum payments.  Basically, we’re now forced to double-correct our credit usage because our households kept on borrowing through our last recession!

Don’t Let History Repeat Itself

Use this double-correction recession to your advantage, and resist the urge to increase credit card spending when our economy begins to break out of this.  Practice delayed gratification by saving up to pay for things.  It is character-developing.  Use blog post and financial personalities to motivate yourself to get out of debt.  If you think you’re in too big a hole, consult some professionals about options prior to filing bankruptcy!  The point being, you need to eliminate past mistakes and work hard to put yourself into a position where financial mistakes won’t happen again.

Proverbs 22:7 (The Message) says “The poor are always ruled over by the rich, so don’t borrow and put yourself under their power.” Other versions say the borrower is servant, or slave to the lender.

With a deep recession and slashed credit limits, you have been forced to change your habits… for now.  What habits you default to when times are good again economically?

Are you subjected to the power of the rich?  Are you a servant?  Who owns you?

photo by Andres Rueda

Personal Finance consumer debt, credit card, dave ramsey, debt, suze orman