Swiping, tapping or dipping your plastic to earn cash, points or miles seems to be an effortless trend among Americans. In fact, a recent finder.com study found that nearly 1 in 3 Americans make purchases on their credit cards, totaling $175.8 billion, just to get their benefits or rewards.
The credit card industry is winning over consumers with its loyalty program by offering appealing benefits to those who make routine of purchasing with their plastic. Credit card loyalty schemes, which sees points exchanged for cash, travel miles and other items have really tapped into a unique psychology of spending; one that makes us feel like we’re winning when really, we’re just spending more.
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Who’s Leading the Trend
Millennials are the most likely age group to chase points, with 36.5% claiming to use their plastic when making purchases. Following closely behind are Gen Xers at 30.2% and baby boomers at 24.3%. However, despite millennials swiping more frequently, Gen Xers seem to splurge the most, spending $2,942.57 per person.
Men are spending double that of women and are more likely than women to spend just for the rewards program, at 30.9% compared to 27.6%. If done properly the system can be played to our advantage; however, with men using their card for larger purchases, such as tech and music, it’s important not to get carried away. The benefits of these programs become minimal if you’re put in the position of owing more than you are receiving.
With credit card reward programs, the higher the spend, the more points you receive. Each quarter offers more appealing benefits in certain categories, which persuades consumers to choose credit over debit when making such purchases. While there’s no science to how high or low a purchase should be when placing it on a credit card, avoiding high balances can help you avoid any debt-related ramifications that can be associated with credit cards.
It is possible that Americans are adopting the habit of spending more frequently on items that cost less. The finder survey shows 88.4% of Americans spending on food and drink followed by 62% spending on household items. Not only can this help you avoid the pitfall of swiping, but it’s also safer to swipe on items you would be purchasing regardless of whether or not you have a credit card.
Interestingly, the survey found that baby boomers are the most likely to spend on everyday items, such as food and drinks and household items (24.3%), whereas Gen Xer are spending on clothing and accessories, shoes, technology and electronics (30.2%), with millennials swiping the most for cosmetics and fragrances, music and literature (36.5%).
Choosing the Right Credit Card
Choosing a card is not a “one size fits all” decision, and consumers should weigh a variety of factors before committing to one. While it can be appealing to sign up for the card with the “best” loyalty program, consumers should first compare APRs and annual fees to determine if they are the best fit for their financial situation. When playing into the rewards game it’s better to have less points and no debt then to owe a credit card company more than its offering you.
Article by Jennifer McDermott
Jennifer McDermott is Consumer Advocate at personal finance comparison website finder.com. She has more than 12 years’ experience under her belt in the finance, lifestyle and travel industries where she’s analyzed consumer trends. Jennifer loves to uncover interesting insights and issues to help people find better.