Some consumers use credit card rewards to pay for essentials amid high inflation, study finds

Credit card rewards are a way for consumers to offset the higher cost of living, according to research from Wells Fargo. (iStock)

According to a Wells Fargo Study.

The study surveyed more than 2,000 adults in the United States and said 92% of Americans are worried about rising inflation and nearly half of rewards cardholders have used these earned benefits to help offset the price of certain daily expenses.

Nearly three-quarters (71%) of Americans said they have rewards cards, and 45% of rewards cardholders said their credit card use had increased during the pandemic. Additionally, two-thirds of rewards cardholders (65%) said they care about credit card rewards more than ever.

“The survey data underscores the significance of rising inflation and supply chain issues, and how U.S. consumers have been affected in so many ways,” said Krista Phillips, executive vice president and Head of Card Branding and Marketing for Wells Fargo Credit Cards.

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Inflation in focus

The Wells Fargo study said rising inflation is a concern for nearly all credit card users who participated in the study.

The Bureau of Labor Statistics (BLS) recently reported that inflation rose to 8.5% annually in July from 9.1% the previous month. Although the improvement was slight, food prices increased by 10.92% per year and the price of housing (rental and purchases) increased by 5.7% per year.

“When it comes to credit card spending over the past couple of years we’ve seen categories change depending on where people spend their money and right now our top categories are groceries and gas” , said Phillips.

According to Federal Reserve Bank of New York. In addition to credit card balances, Americans also opened 233 million new credit card accounts in the second quarter, the most since 2008.

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Credit card charges at risk

A new bill that would affect how retailers are charged to merchants could also affect how credit cards offer rewards. The Credit Card Competition Act 2022, sponsored by Sens. Roger Marshall, R-Kan. and Richard Durbin, D-Ill., would require two competing networks to be activated on one credit card. It wouldn’t just be Visa or Mastercard anymore – it would have to have a smaller competing network enabled on the card.

The bill aims to reduce interchange fees for credit cards by increasing competition within the industry and would essentially remove the key funding mechanism for rewards, according to Robert Triest, president and professor of economics at the Northeastern University. If the legislation passes, he said the Federal Reserve will issue regulations within a year.

Triest said in an article published on Northeastern University‘s that the proposed new rules would lead to lower costs and a fairer system that will particularly help consumers who do not qualify for credit cards.

“I like paying for everything with a credit card that gives me a cashback bonus,” Triest said. “The bank charges merchants high interchange fees for processing each transaction, and then the bank gives me some of that as rewards. So I get a good amount of money back because I use my debit card. credit for everything.And the bank keeps part of the commission income as an additional profit.

“But someone who doesn’t have a credit card – someone who uses cash instead – is contributing to those credit card rewards because they’re paying the higher prices that result from credit card fees. ‘interchange,’ he continued. “They don’t benefit from the rewards that I receive.”

Americans for Tax Reform, a politically conservative US advocacy group, said it opposes the legislation. In a statement on its websitethe advocacy group argued that the cost of requiring multiple dual-message networks to operate on a single card is so costly that the more than $60 billion in rewards consumers receive each year would largely disappear.

If you’re struggling in a rising inflation environment, you might consider taking out a personal loan to help you pay off high-interest debt at a lower rate, saving you money. each month. Visit Credible to find your personalized interest rate without affecting your credit score.


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About Shirley L. Kreger

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