Are Rewards Programs Keeping You Away From A Healthy Budget?

In today’s economy, if you still have not made a workable budget for yourself, then you are in very deep trouble. The slow economy and the rising unemployment is a threat that no American consumer can afford to ignore. This is especially true for the vast majority who are suffering through debt.

Creating a workable budget for yourself can be quite a task. When you create your budget, you need to review minutely every little detail regarding your finances, tracing where your money is being spent on and how much you are earning every month. You will need to consider what things you have to give up in order to make your budget workable. Possibly, many of these will be things that you care about a lot which makes the job doubly harder. For those who find it too hard to make a successful budget, they can easily get help from professionals, surprisingly for little to no pay. However, the success of your budget will ultimately depend on how well you can stick to it. Discipline is the key and, as much as possible, you would want to avoid any temptations to spend more than you actually need to.

Unfortunately, the balance is stacked against you right from the start. The market today has grown very adept at enticing consumers to spend. Everything from special offers to low interest rate purchases are specifically designed to make you confident that you are making the right choice when you go through with a purchase when, actually you are not. And, according to a recent academic study, those rewards programs that you so value in your credit cards may be costing you more than you are actually earning.

A University of Toronto marketing specialist and an economist of the Kansas City Federal Reserve Bank recently went through the data collected from an American Bankers Association survey in 2005 of the users of credit cards and debit cards. The survey involved around three thousand people and the questions asked were regarding the rewards programs that these people were getting and how their perceptions were affected by the program when the made transactions.

The findings of the study show that consumers are much more inclined to use their credit cards if it is enrolled in a rewards program even if they had an existing balance. If the rewards programs were removed, according to the study, a small consumer percentage would move from using credit or debit cards to using cash or checks. However, the study also showed that the majority of consumer would still prefer to use debit or credit cards whether rewards were available or not. Also, according to the study, the effect of removing rewards from debit cards would be lesser than if they were eliminated from credit cards.