Credit card rewards programs have traditionally featured airline miles, gift certificates, and cash back for customers who spend enough on their cards. But recently, credit card companies have started offering a different kind of gift: they are handling out lower interest rates, refunding interest payment, and using other strategies to provide incentives for cardholders to pay down their debt and make on-time payments. The deals, however, don’t always work in consumers’ favor.
The new Citi Forward Card gives cardholders points and reduces their annual interest rate for making on-time payments and for staying under their credit limit. TD Bank’s Simply Flexible Card charges interest rates depending on how much of balance customers pay off. If they pay off 10% or more of their balance, then they get the lowest available interest rate.
Card companies say the idea behind the new rewards is to help customers get on top of their finance. “It’s all about promoting financial fitness and giving customers the choices they need to help them manage their debt,” says Michael Copley, senior vice president of TD Bank. He says the Simple Flexible Card motivates cardholders to pay off more of their debt and attributes the company’s relatively low delinquency rate to the product.
Because of the continuing recession, companies have an incentive to keep their customers from sliding further under water. “This is in response to recognition that they have to help their cardholders do a better job of managing their money so customers keep those cards for a long time,” says Ron Shevlin, senior analyst at a research and advisory firm. The challenge for companies, he says, is to balance the profitability of consumers who maintain a balance against the increased risk that those cardholders pose because they are more likely to default on their debt.
According to consumer advocates and credit card experts, consumers who always carry a balance may be better off selecting a card with the lowest interest rate rather than participating in one of these rewards programs. “In general, I think these cards are great for people who don’t have great credit and regularly carry a balance on their cards” says Adam Jusko, founder of www.indexcreditcards.com. “Customers who only occasionally carry a balance, on the other hand, would be better off finding a card with a more appealing rewards program” he adds.
21. The recent credit card rewards programs include ______.
A. low interest rates and interest payment refunds
B. gift certificates
C. cash back
D. air miles
22. A cardholder of Simple Flexible Card will get the lowest interest rate if he ______.
A. makes six successive on-time payments
B. pays off 15% of his balance
C. pays off the balance on time and stays under credit limit
D. pays off 5% of his balance
23. Michael Copley holds that rewards programs ______.
A. don’t always work in customers’ favor
B. can help customers pay off more of their debt
C. can result in a relatively higher delinquency rate
D. can help cardholders manage their finance
24. The underlined phrase “to keep their customers from sliding further under water” implies that _______.
A. the companies aim to help their customers during the recession
B. the companies help customers manage finance better so they keep the cards longer
C. the companies are going to manage the money of their cardholders
D. the companies want to give customers more choices in the recession
25. The consumer advocates and credit card experts suggest that _______.
A. it is better for those who pay off the balance to select a lower interest card
B. customers who pay off the balance should not participate in any rewards program
C. the lowest interest card is a better choice for those who always carry a balance
D. customers who carry a balance should always select a card with rewards programs