Reward Card Offers On The Rise

The credit card industry is seeing a drastic change owing to the economic crisis and the upcoming new credit card legislation. Credit card company practices are changing drastically, reflecting a change in how credit card companies view credit cards and those who carry them.

One particular change which illustrates very well the shift in thinking among credit card companies with regards to credit card holders is the increase in the marketing of reward card offers.

The increase of rewards credit card offers comes as no surprise. Rewards cards have always been popular among credit card holders and reward cards are also generally reserved for credit card holders whose credit ratings range from good to excellent. However, rewards card offers do come with a price – annual fees.

According to market research done by the firm, Synovate, 28% of the rewards cards offered during the third quarter of the year carried annual fees. That’s a sizable increase considering that, during the same period last year, rewards cards offers amounted to 21%. The Synovate firm tracks per household credit card mailings.

The market research also showed that, during the first month of the fourth quarter of the year, 36% of rewards card offers already carried annual fees. Anuj Shahani, the director of competitive tracking services in Synovate, expects this spike which was seen on October, to continue on as the fourth quarter comes to a close. Shahani says that the shift in the credit industry is not surprising at all. At the moment, banks are turning their focus towards the more credit worthy customers so that they limit their risks in the economic downturn.

Generally, there are certain rewards card types that are more susceptible to carrying annual fees. These include rewards credit cards that are cobranded with a particular airline or a hotel. Exclusive cards which offer higher membership rewards are also apt to carry annual fees. For instance, American Express’ high end Preferred Rewards Gold credit card carries a fee of $125 a year.

Although annual fees are not really common for a basic rewards credit card, analysts predict that they become commonplace soon enough. This is expected considering the implementation of new federal regulations which will put severe limits on the ability of credit card companies to raise their interest rates.

Synovate’s data also shows indications that credit card issuers are offering more tiered offerings to consumers. This means that the better the reward, the higher the cost is for the card holder. The Hilton Surpass card introduced by American Express last February makes a perfect example. Card holders can get nine rewards points for every dollar that they spend in participant Hilton hotels if they pay an annual fee of $75. For card holders who do not pay a fee, they only earn six rewards points for every dollar spent.