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Credit cards can lead to trouble: who can refuse such convenience, perks, flyer miles and rewards programs? Of course the downside is that bill you receive at the end of the month. According to the folks at the Federal Reserve, Americans carry a monthly average of $9,000 in credit card debt. That’s a lot of charging, and unfortunately, a lot of interest being accumulated. Of course, you could always choose to use your debit card instead, that is one way to stay “debt free forever,” if you don’t have the cash, you cannot make the purchase. Debit cards are safe, they come with no frills, little rewards programs, but that may soon be changing.
Since the government passed the ruling to place a cap on the swipe fees that banks can charge merchants for processing transactions, many banks have been reducing benefits of debit cards, or altogether canceling their debit card rewards programs. Now banks have found a way around the cost of rewards programs by offering customers discounts that come from the retailers directly themselves. The system will work something like this: when you log into your online back account, there will be a rewards or offers tab. Going from there, you can shop the list of offers, and when you see something that you like, click on it to activate the right offer. The discount will be applied the next time your shop using your debit card at the point of purchase.
The banks, too, will profit from this new paradigm in rewards programs. When a consumer utilizes the discount, the retailer pays a commission to the bank. This tends to be usually a percentage of the offer, as a sort of finder’s fee. It does appear as a win/win situation: you receive a discount, the banks earn money on the transaction, and the retailer has a lot of customers steered to their stores. This is not only being utilized by traditional brick and mortar stores, many online services are using it also, including big names like Amazon and ITunes. The program will most likely begin to localize offers as it catches on. The only drawback is for consumers who don’t feel safe having their shopping habits monitored, a consequence many internet shoppers find a little too George Orwell “Big Brother” for their tastes.
Perhaps this can be read as a sign of things to come and a big boon for the debit card industry. Right now the services is still in its infancy, and let’s face it, there are few perks here. Right now a debit card can’t compete with the fun of applying for a credit card; there are just so many different rewards programs out there. Given time and expansion though, this program may just give traditional credit cards a run for their money.
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