...Pssst!
😎 Reselling that age old promise of an artificial bargain, or that one last chance to get a little something for nothing?
A interesting discussion on the ins and outs of rewards cards has broken out in the comments section of the last two posts. Check them out [link - 3/7] and [link - 3/6]. Hope it doesn't come as a surprise to you that those points, miles, and cash back "bait-and-switcheroos" cost the provider - in this case SECU - some big bucks to provide.
Most consumers never consider the costs of rewards. In the realm of finance, most of us live in a sorta fantasy land of oblivia. In order to exist we are forced to play in the finance world (direct deposit, mortgages, credit cards, Zelle, IRAs, taxes, pensions, insurance), even though we really don't understand the rules of the game.
We tend to choose to overlook or ignore The Eleventh Command: "There is-eth not a free-eth luncheon." Many financial service providers prey upon our lack of understanding. The cost for ignorance to consumers - you and your family - are great. Rewards cards are a good example.
When the "rewards card concept" first came on the scene decades ago, SECU staff and Board took a look, but it appeared to be little more than a marketing gimmick - no great value to the members. As the years past however, the rewards programs were enhanced, refined, and expanded.
Airline miles became the rage and later cashback was added for the stay-at-home types. Sign-on incentives, discounts, two-fers, recommend-a-friend, 2X/3x bonuses, airport lounges, free tickets, concierge services - the hype became universal, marketeers entered frenzy! "The industry standard" became a rewards card - everyone had one (or 2.3!). Except at SECU, so another look was taken.
The credit card folks (Visa and Mastercard are the leaders) were subsequently asked to provide SECU with reward card "proformas", which are simply financial projections of the number of cards which would be issued, the resulting loan balances, operating costs and what would be required to make a rewards card program "profitable". Paying for the airline miles, points and cashback was a major cost (see Eleventh Commandment above!).
✅ Who would pay those costs? The financial proformas showed that SECU "transactor" members [link - 3/7] paid off their balances in full each month, so they got a "subsidized", free ride. The only way to recoup the cost of a rewards program was through the interest charged to SECU "revolver" members, who don't pay their balance in full.
😎 Hope you can see where that proposal was heading.... (more to follow).
... this is starting to look like RBL with "rewards"! Guess the SECU Board is now gonna "pick the member's other pocket"...
