The Way Credit Card Firms Deceive Cardholders
Making purchases with a credit card can feel as though you are not ever spending money, you do not have to hand over cash nor is the amount taken out of your account. Instead you receive a bill with a total of your purchases at the end of the month, which may be more than you were expecting. Studies show that consumers spend more when they’re paying with credit cards than when paying with cash, and in one study, participants were willing to spend as much as twice the amount when using credit cards versus using cash. This is only one of the ways financial and non-financial institutions make money. This is especially prevalent with high interest rate credit cards. These credit cards can often seem enticing to consumers as these cards often offer incentives to spend such as cashback, loyalty points, etc which means that the cardholder could make money from the credit card. However, these benefits are only worthwhile if the bill is paid in full otherwise the cardholder could end up paying more than the value of the rewards/benefits from the interest that is charged. As well as this, merchants accepting credit cards are required to pay a processing dee to the acquirer on transactions made on the card. In some cases, these charges are passed onto the cardholder on the grounds of an agreement made between the two parties. Thus, the cardholder must pay these additional charges along with the cost of the purchase(s) made.
On top of this, these types of cards may not be as beneficial as they seem especially for younger cardholders. Paying these extremely high rates of interest can be extremely unbeneficial as majority of younger consumers will not have the need to travel many places and, in turn, having benefits like travel insurance would not help the consumer and will inevitably hurt their financial. In summary, card firms easily deceive consumers/cardholders by using the benefits and reward programs of their high interest rate credit cards in an attempt to elide the downsides of them. first speaker’s argument – rewards programs This leads to the first speaker’s argument of rewards programs.
Cardholders are more likely to be motivated by points rather than fees and interest. The consumers who were found to have made a net gain on their rewards cards were high-income earners, while those who did not earned lower incomes and were more likely to use the card to borrow. This can be especially damaging to younger consumers who are the most likely to be easily swayed by these points and are a prime example of targets for financial and non-financial institutions. There are also limitations to collecting and redeeming these rewards. Some credit cards have a maximum amount allowed for points. For example, the cardholder may be given 5% rebate for every dollar spent, but only until they reach $1000 and then no matter how much the cardholder spends after that point, no points will be given.
In summary, this shows how card firms can deceive consumers into thinking that the limit for reward points is infinite as these conditions are not openly stated unless a thorough read is conducted by the consumer which can easily be looked over. Some credit cards even forfeit points after a limited time period; unredeemed points for the whole year will not be rolled over for the next year, which means all the points you earned will just go to waste.
