A favorite element of using credit cards for many people has been the enticement that they were earning points to rewards. Customers who spent more using their credit cards and built up debt balances were rewarded with airline tickets, hotel stays, cash, or catalogs filled with almost anything else a person could desire. Some companies, under financial pressure, have eliminated their award programs entirely over the course of the past year. Most card issuers are reporting that 12% of the balances owed them are currently not being repaid, and that number is expected to increase even more.
A growing number of companies are continuing to offer award programs, but they are changing the way that customers can qualify for those awards. Instead of award spending, card issuers are now rewarding consistent and timely payments from customers. Here are some of the incentives and programs card issuers are offering to customers in hopes of enticing payments.
– Consecutive Timely Payments: Some card companies are willing to lower the interest rate being paid by customers for those making regular payments on time. For instance, Citigroup has issued a card that offers awards and reduces the interest rate by a quarter of a point each time the customer makes three consecutive minimum payments on time. Other companies have started similar programs to reward customers for making payments on time and paying off certain percentages of their outstanding balance.
– Customer Education: Many credit card companies are offering their customers access to tools and resources designed to help them understand the consequences of credit card debt. It’s hard to imagine credit card issuers promoting healthy credit habits to their customers even as recently as a year ago. Card companies are depending much more on their customers to repay their outstanding debt than they are on customers to rack up additional debt that they may not repay in the future. Many card issuers have online tools for their customers, including calculators that can help customers develop a strategy to pay down their debt in the most efficient way possible.
– Flexible Interest Rates: One of the best incentives a customer can receive in order to stay on top of their credit card payments is the opportunity to decrease the interest rate associated with their debt. TD Bank, for example, is offering a flexible rate credit card that allows the interest rate to change based on how much of their balance they pay off. Making a payment of at least 10% of their outstanding balance guarantees that they will receive the lowest possible rate. Discover has also issued a credit card that repays one month worth of interest to a customer after six consecutive monthly payments.
These incentive plans aren’t going to motivate every customer to make substantial payments on their credit cards, but some customers will make an extra effort to take advantage of these offers. The true awards that should be motivating credit card holders are the benefits of getting out from under the burden of credit card debt. There’s nothing wrong with taking advantage of the incentives being offered by card issuers to help you get to a life without credit card debt.