#534
Not the Points!
Published:
Apr 08, 2024
Author:
Sarah Parsons Wolter
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In the realm of fintech, who better to learn from than credit card companies when it comes to walking the fine line between appealing to customers and maximizing profitability. Thanks to rewards schemes, credit cards have become experts in this field.
Interchange fees are at the heart of the business model, playing a pivotal role in incentivizing spending and shaping credit card reward programs. In other words, card issuers leverage an interchange fee to secure participation in their particular card ecosystem and in turn, capture the most desirable customers. These dynamics are especially important in a world in which consumers have significant optionality with the channels through which they spend their money.
Card issuers continue to come up with creative strategies to acquire and retain customers, but beyond the headline sign up bonuses and targeted marketing tactics that we’re bombarded with in every news article, magazine, and other source of content for your stereotypical “high spender”, reward structures are often intricate and multi-faceted. Issuers design these programs to appeal to different consumer segments and behaviors, offering various incentives and bonuses tailored to specific spending categories or preferences.
However, regulatory changes have the potential to impact interchange rates, fee structures, and consumer protections. The Consumer Financial Protection Bureau (CFPB) has honed in recently on card issuers’ tendencies to obscure T&C that allow them to discreetly adjust rewards or redemptions. If successful, you may never again have to worry about that fully points-funded holiday slipping through your fingers!
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Not the Points!
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CFPB’s credit card rewards scrutiny threatens a perk consumers really love - Among the issues to be examined: Whether and how some credit card issuers conceal terms and conditions that may allow them to revoke rewards or make the points difficult to redeem. The news follows Chopra’s remarks last year that his agency would look at how points programs are constructed and how they are redeemed. Read more
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