Loyalty programs have been around for ages in many forms. Just ask grandma about those little green stamps that grocery stores and gas stations used to give out. From childhood on, humans are conditioned to value rewards. Marketers know that the lure of a reward can have a powerful effect on consumer behavior. In the highly competitive and lucrative business of credit cards, reward programs are growing faster than ever. Are credit card reward programs really a good thing for consumers?
Not so long ago, it was hard to get a credit card. Many stores and service providers did not accept credit in any form. While credit cards have become steadily more popular since the 1950andrsquo;s, it was not until the 1980andrsquo;s that banking deregulation made it possible for banks to charge basically whatever they wanted for credit card interest rates. The convenience of credit became the fuel of our economy. It didnandrsquo;t take long for marketers to figure out that credit card rewards spurred sales and built brand loyalty.
Along with banking deregulation, airlines were deregulated in the 1980andrsquo;s. Competition spurred cheap fares and savvy marketers began the wildly popular airline miles reward system. Credit card reward programs built around airline miles were quick to follow. Other credit card reward programs, such as the Discoverandreg; card were aimed at rewarding heavy users with cash back.
It is estimated that over 60% of all credit cards used in the US today are connected to rewards programs. That number is growing. Although miles and cash back are still big favorites, everyone from gasoline stations to pro sports teams have credit card rewards programs in their marketing mix.
Assessing whether any particular program is a good deal depends greatly on personal spending habits. Not all rewards programs are free. Like everything else with credit cards, the devil is in the details of the offer. The best rule of thumb is to determine if a card will reward you for doing something you will do anyway.
Are you a road warrior who travels extensively? Can you keep all the airline miles you are accruing for personal use? Do you make your own travel arrangements and get reimbursed for them? An airline credit card reward program is a hands-down winner, even though there is an annual fee to have this card. For the average traveler, it is not a good deal. Addicted to a certain catalog clothing store and buy everything from underwear to overcoats, year after year? Yes, a credit card reward program that gives special discounts, free shipping and other perks is a very good thing.
When it comes to selecting a credit card, the last thing on the list should be the rewards it offers. Interest rates, fees and the protections the card provides are far more important. Every time a credit card is used, itandrsquo;s a loan. Shop for the loan terms first and the rewards second. By all means, if thereandrsquo;s a reward out there that makes sense in your life, take it and enjoy.

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