It seems totally twisted to me.In effect you go to a bank and ask to borrow money at no interest (if you pay it back in time) and you ask to be rewarded for borrowing their money for free by being given free trips to exotic places from time to time. Since there are actual costs associated with lending money and with travel, it is agreed that people with less disposable income will fund the whole affair.At the moment as far as I've gotten is to notice how upside down this powerful aspect of our economy is. In the Hans Christian Anderson story about the emperor's new clothes all it took was one child saying "he has nothing on" for the entire populace to speak as one: "he is wearing nothing at all!" Perhaps, if associated with the right idea for an alternative to the present ridiculous state of affairs, a change for the better could be brought about. Any ideas?
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This should exent to other service anf product sectors that use such tacticts to draw customers, in that the should offer no frills service/goods without the premiums.
Forgive me if I am wrong but I think your description of credit cards is missing a few pieces to the puzzle.
Each business that accepts credit cards pays a transaction fee for the privilege and convience of allowing their customers to pay with credit card. These charges vary but are usually less than 3% of the transaction being charged to the credit card. As you can imagine this adds up to a bit of money if you have millions of transactions per minute going through your system. Transaction fees, late fees, and interest fees are how credit card companies make money.
Most banks that issue credit cards prefer customers that are the lowest risk to them of nonpayment. This is why they reward them with lower APR's, no balance transfer fees, cashback, airline miles, ect. The banks want to attract clients that are low risk by offering benifits. The transaction fees these people generate pay for the rewards.
Yes a large portion of Americans don't pay off their credit cards each month and their interest fees line the pockets of their banks. However banks certaintly dont depend on them to pay for rewards.
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