By Rachel Morey


5 Min. To Read

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Nearly one-third of U.S. credit card holders paid their balances in full every month during the first quarter of 2017 according to the American Bankers Association. In 2008, only 20% of cardholders weren’t carrying a balance from one month to the next.

Credit card use is on the rise, and it may be due to enticing rewards programs. Banks collect higher fees on credit card transactions, so they can afford to offer rewards that consumers find hard to resist.

Credit card assets offer banks big returns. The Consumer Financial Protection Bureau (CFPB) reported that banks made three times more money on credit card products than they did on all other assets combined.

Among the six largest card issuers, spending on rewards programs went from $10.6 billion in 2010 to $22.6 billion in 2016. In the first quarter of 2017, they spent 22% more on rewards programs than in the same quarter of the previous year.

People who commit to paying off their bill in full each month get the benefit of the credit card company’s reward programs without having to pay hefty interest and financing fees.

According to the Federal Reserve Bank of New York, consumers have four credit card accounts per household and 1.5 debit card accounts. The credit card market remains stable, even as interest rates on variable-rate accounts rise.

Cashback rewards programs are popular among consumers because of their versatility. The Discover it Cashback Match program offers 5% cash back in rotating, yet broad categories which can then be matched at the end of a cardmember's first year. Every other dollar spent on the card gets 1% cashback. This card has no annual fee.

While most consumers with credit scores of 690 and below don’t qualify for a credit card with cashback rewards, Discover it offers a secured card option that helps build credit while extending cashback rewards to subprime consumers.

With a minimum of $200 initial deposit, secured cardholders can get 2% cash back in categories that rotate each quarter plus 1% cashback on all other purchases made with the card. The interest rate is 24.24% on this card, so it’s important to pay off the balance in full each month. Discover begins reviewing the account at the eight-month mark to see if they can transition to an unsecured account.

The cash rewards attached to this account do not expire, and cardholders can redeem them at any time. The best cards for balance transfers don’t usually offer robust rewards programs. New cardholders can qualify for 0% on purchases for the first six months and 0% for balance transfers for the first 18 months. There is a 3% balance transfer fee.

Other credit card companies offering rewards programs with their secured cards include Navy Federal nRewards, AeroMexico Visa, and SKYPASS Visa. For people with past credit problems, the current state of abundant rewards programs combined with the ease-of-use of secured and credit-building cards makes 2018 a great time to establish good credit.

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