A new report released by the Electronic Payments Coalition sheds light on how American consumers, particularly those in lower-income households, utilize credit card rewards and the potential impact of proposed restrictions on these programs. The study found that regardless of income, cardholders across the spectrum take advantage of credit card reward programs at nearly identical rates.
Richard Hunt, Executive Chairman of the Electronic Payments Coalition, emphasized the importance of cashback rewards for financially vulnerable households, stating, "Americans of all incomes take advantage of credit card reward programs but the most financially vulnerable households depend on cashback rewards to help make ends meet."
One significant finding of the report is that while there is a common preference for "cashback" rewards among all account holders, lower- to moderate-income (LMI) households show a stronger inclination towards cash rewards, particularly during peak shopping seasons like November, December, late summer, and back-to-school periods. The report highlights that the boost represented through rewards is significantly more impactful for LMI cardholders compared to higher income individuals, providing a tangible savings opportunity for these households.
Moreover, the study revealed that rewards earned through credit card usage can help offset price increases, offering potential savings that cash and debit card users may miss out on. The report also addresses the misconception that merchants pass on the cost of card acceptance to consumers, highlighting the benefits of credit card acceptance for merchants.
The research further indicates that reward cardholders often carry a balance of unredeemed rewards, which serves as a crucial safety net for these individuals. The study, conducted among EPC members representing a significant portion of the credit card market, showed a notable increase in rewards card ownership among lower-income consumers over the past few years.
In conclusion, the report underscores the importance of credit card reward programs for households across various income brackets and emphasizes the need for continued investment in new technologies and national data security standards to strengthen the payment system.
As more lower-income households rely on credit card rewards to navigate their finances, the findings of this study provide valuable insights into the role of rewards programs in supporting these individuals' financial well-being.