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May 8, 2009
Credit Card Rewards, Pt.3
Who’s using them?
Previous...
In light of the situation, consumers should
examine their own life styles to determine what
if any value they would benefit from with any
particular credit card rewards system. According
to the Federal Reserve’s February Bulletin, 46.2
% of our nation’s families are holding credit
card debt which includes a whopping 58.8% of
couples raising children and 48.7% of single
parents. Overall, the average credit card
balance rose to $7,300, a hefty increase of
30.4% between 2004 and 2007. Bank type cards
account for approximately 87% of the outstanding
card balances in 2007. Undoubtedly, a major
portion of spending by consumers raising
families would be attributed to meeting the
needs of the children. These numbers strongly
indicate a growing market for lenders in finding
the right product to market the unique needs of
these consumers.
Consumer reports have also shown that
consumers who use credit cards associated with a
reward program spend a great deal more than
those who carry cards without added incentives.
Many consumers fail to realize that most of
these rewards do not come without a price. Along
with the rewards usually comes a high interest
rate. Interest rates vary from card to card and
range from 9.5% to over 15%. Many also market
balance transfer offers with six to ten months
interest fee; however, they charge a service fee
of 3% to 4% of the amount transferred.
Furthermore, the balance transfer fee comes due
with the very next credit card billing cycle.
Basically this means that any savings the
consumer might realize initially would be lost
when averaged out through the year.
If you are a consumer raising children, what
does this mean to you? It means that you are at
a much higher risk of falling into the credit
card rewards trap. This makes it essential that
you make a concerted effort to thoroughly
analyze your spending habits and weigh the pros
and cons of accepting any card, more
specifically, those associated with a rewards
program.
Continued...
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