I believe we have already started seeing changes in rewards cards from certain banks and not for the better for certain cards.

I have a credit card that has rewards. I do agree that we the consumers do pay for these rewards but I have to admit I have been hooked to a credit card because of the rewards they offer.

I like Scribbler's post but what about consumers such as myself that even though the recession is here isn't in a position where he will not default on his card because of good management of his account? Make the "cash-based" credits an option but keep the luxury items as an option too. If you have been disciplined in your spending habits and paying off your balance in the good times, the consumer will weather the recession and continue on. I know that they have vacation packages out there that require 100,000 points to take advantage of but don't take that away from someone who has made this vacation package his objective and has been disciplined enough to not get over his head in his quest to reach it.

Great post Scribbler. Using credit cards for rewards can be one of life's great pleasures. After all, we the consumer fund rewards programs, in return for mark-ups due to transaction fees, as well as the more obvious fees and interest that we pay. It's nice to get some of that back.

I've noticed that when a rewards card offers both cash back and merchandise (called flexible rewards programs), the cost of an item at a competitive store will normally be about 30% cheaper than redeeming rewards for merchandise when comparing cash value for rewards points. So I always take the cash back option, that is applied to my open balance, as your example stated.

Until the financials regain their balance, and our economy's blood pressure lowers to normal, I believe that the competitive marketplace for banks acquiring new credit will weaken. This is when we will see new things such as the way rewards programs work.

On the flip side, most of the rewards programs are brands targeting consumer loyalty. I really don't see a major overhaul coming anytime soon for these types of programs.

It could happen. A new report out by financial services research company Tower Group has suggested that it's time for a change of direction when it comes to credit card rewards. In their opinion, credit card providers shouldn't be offering the luxury items anymore as a hook, but rewarding loyalty with something that improves the customer's credit management. The example given is "cash-based credits that can be applied to open balances."

I think it's a smart idea. By all appearances, our pre-recession days are numbered if not here already. When paychecks are no longer a certainty and a good reliable customer could slip into defaulting very easily, then why not have that reward as an option instead of the vacation they'd probably never take anyway? Not only does it help the card holder manage their balance and cash flow but if the credit card company ever had to write off the customer's debt as a loss, that loss would be lessened because of the reduced balance.

The big question is, would the card issuers want to adopt it or the card holder for that matter? Tower Group estimates that reward programs influence almost 70% of US card transactions, so it's obviously currently working well for the card issuers as an incentive. Whether they or the consumer would be willing to change that remains to be seen.

Here's the research information reported at BusinessWire

Anyone like to share thoughts/opinions on this?