American consumers will have to face yet another bubble soon. This one doesn’t have anything to do with housing, bitcoins or the internet. Instead, the newest one involves the plastic cards most of us carry around in our wallets — more specifically, their rewards. Over the last few years, credit card mania has swept the nation. Countless articles, blogs and forum discussions center on maximizing your miles and bonuses, with promises of free travel or mounds of cash back. The reward currency is at an all-time high, with many cards giving consumers as much as 5% to 10% back on purchases . The average consumer can walk away with thousands of dollars in rewards per year. Unfortunately, this may not be sustainable for much longer. Business owners subsidize credit card reward programs in the United States. Anytime you make a purchase using your favorite card, the issuer takes a cut of the sale away for the merchant. The interchange fee, as it’s called, comes out to roughly 2% . Credit card issuers take their piece of the pie, and pump the rest into the rewards programs everyone enjoys. In recent years there have been several pushes by retail associations and lobbyists to curb interchange fees. They argue the charges are unfair and present a burden to small business owners operating with thin margins. Visa V -0.12% Inc. and Mastercard Inc. are also battling retailers in the courts over allegations of price-fixing schemes. They are facing off against giants like Wal-Mart Stores WMT +0.12% Inc., and Amazon. Last month, Visa and Mastercard offered a $5.7 billion settlement to end the proceedings. The federal appeals court rejected their proposal. How Credit Card Rewards Perform Around The Globe Credit card rewards are significantly weaker in Europe and Australia. This is largely due […]
