Your So-Called Rewards Cards Exposed – Again
Many personal finance bloggers dedicate a lot of words (and affiliate links) discussing rewards credit cards. According to these writers and their eager-beaver reward-chasing readers, rewards credit cards are a gift to consumers from the benevolent card companies: Visa, MasterCard, and AmEx. In the past and again today, I am calling BS on this entire concept.
The rewards card fans sometimes acknowledge this but profess not to care because they (according to them) are “winning” i.e. beating the card companies at their own game.
I’m still calling BS on this assertion. It now appears that the government is on my side of the argument.
Yes credit card geniuses, today the Justice Department filed an antitrust suit against American Express. The basis of the suit is that AmEx places contractual restrictions on merchants that impairs their ability to offer discounts to consumers for using a different card.
Let’s translate that for the card addicts: American Express is using your rewards card in a way that keeps merchants from offering you discounts and lower prices.
Let me quote the Attorney General to reinforce the point:
Because American Express has refused to change its rules, consumers are being held hostage from receiving the expanded choices and lower prices that they deserve under our settlement. We cannot allow this to stand.
Visa and MasterCard have been doing this as well but they have already settled. That was quick. Do you think they know something you don’t about the anti-consumer effects of their own conduct?
The Wall Street Journal article I have linked below questions whether rewards card users would change their behavior even if offered a discount for using a different card or no card at all. I believe that some will (those who logically think through the entire issue) and others won’t (the short attention span thinkers).
Full disclosure: Mr. and Mrs. ToughMoneyLove use a rewards card. The card is a debit card. The reward is 3.3% interest paid on all checking deposits up to $25,000.
We are rewarded for the money we don’t spend. How about you?