Credit card rewards programs tempt consumers with easy gains, but financial market experts say they distort consumption patterns.
Credit cards are fast outgrowing their original purpose. They began life as a convenient means of exchange. They enabled the cardholder to buy stuff they wanted earlier than would otherwise be possible with a cheque say. To use a cheque you had to have the money in your account to back it up. But with plastic you have access to a line of credit they doesn’t have to be repaid immediately.
Of course credit card payments still do this but now they do so much else besides. They are marketed as personal objects that make a statement about the holder. They can be personalized at a price with a picture of you, your best friend or even your pet.
And then there are the ubiquitous credit card reward programs. If you join one of these schemes you accumulate points every time you use your card at places affiliated to the reward scheme. With these points the cardholder can later ‘buy’ airplane tickets, spa weekends or a multitude of other goodies, having already paid for them in earlier transactions.
Many financial experts believe that these reward schemes subtly change the consumption patterns of people and thereby the consumer economy. They feel it produces artificial, unsustainable, economic growth. They would much rather see real investment in metal bashing providing jobs and incomes outside of the plastic economy. It is for the cardholder to weigh up the benefits of reward scheme against the costs of extra credit.