There’s no doubt that credit card rewards are very appealing to everybody, as in some countries they’re considered as flamboyant as mortgage bank accounts. However, it’s very likely for them to become history in the near future!
According to Forbes, the same…let’s call them reasons which made cards so subdued outside the United States could now bring the cash back credit cards to their very end, due to various legal threats, which could stop their funding and see consumers paying upfront for the rewards they receive for using them.
It starts with interchange fees…
Currently, this entire ecosystem is financed by two categories: business owners and merchants. To be more specific, the funds for cash rewards come from the interchange fees merchants pay in order to accept your card at their store.
A big part of those fees is eventually sent to card issuers, generally banks, which use a part of that for funding the cash back rewards which people all over the world know about and started loving.
Usually, banks are the ones which collect interchange fees, but their values are set by card networks, such as Visa, Mastercard or American Express. Even though these networks aren’t in such a big number, they control a huge part of the credit card market. Thus, the accusations of using their influence to set way too big interchange fees appeared…
The lack of competition may be the main cause of this!
For the last 10 years, these networks have been dealing with several legal issues, coming from merchants, over these fees. Keeping it short, this is far from being good news for cash back credit cards, which could disappear sooner than expected or have smaller values.
Merchants claim that in a truly competitive credit card market, the interchange fees would be way lower, but as long as Visa, Mastercard and American Express are dominating, they won’t stop the ‘fight’!