Cash Back Credit Card – Are They Becoming Extinct?
Can you still get a great cash back card? How will the new law affect credit card rewards programs? Since the inception of the new credit card law, many credit card companies started to lower their cash back percentage. Is this the beginning of the end of your cash back credit card?
The Credit Card Accountability Responsibility and Disclosure Act of 2009, commonly known as the new credit card law, may not absolutely put an end to ability to find a cash back credit card but it will surely make it difficult. Since the new law imposes more stringent conditions and restrictions on credit card issuers, the law will make it more difficult for issuers to enforce higher interest rates for risky debtors and to set up contingency measures to recoup losses. As a result, they will most likely cut back on their rewards programs. Your cash back credit card, if it does survive, may become nothing more than a poor imitation of what it originally was.
Credit card rewards programs are not given gratuitously. They come with a price and card issuers may not be willing to take on the burden once the new law becomes effective. Credit cards rewards and cash back programs are the direct effect of the issuer’s yield from high interest rates and penalties. Without these revenue making avenues, cost cutting is bound to happen and rewards programs are going to be the first casualty. As one financial analyst puts it “Remove the source and the spring will soon run dry.”
Despite all of this, the rule of consumerism will ensure that the cash back credit card will endure. Freebies are the lures that will make consumers take the bite. However, if caution is the name of the game before, it is even more important to be extra vigilant in choosing a rewards card given the impending upshot of the new credit card law.
More than ever, when choosing a cash back credit card, read all of the terms and conditions of your contract. Ask questions and make sure to cover all bases before you finally decide to sign up. Keep an eye on reward limits, higher interest rates, tier structured rewards, and the like. Otherwise, what you thought of as the best credit card deal may not be something you’ll be willing to sign up for.
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