When looking at ways to boost sales, it helps to review how certain consumer credit card processing benefits might provide an incentive to buy. As people stretch their gift giving budgets by using credit during the holidays, they are even more likely to do so if there is a promise of a reward for using their credit card.
Do Credit Card Rewards Help Consumers Justify Purchases?
Airline points are a common benefit for credit card users, and are usually the reason people are willing to make purchases on a card. This is especially true when each swipe brings them closer to free round trip airfare for the tropical vacation of their dreams — airfare they would not otherwise splurge on.
The incentive of free airline miles or discounts at favorite stores are just some reasons people are more willing to pull out the plastic, according to a recent study by Andrew Ching, assistant professor of Marketing at The University of Toronto and Fumiko Hayashi, senior economist at the Federal Reserve Bank of Kansas City. Overall, their study revealed that removing rewards from credit cards would reduce the amount of purchases consumers make using credit in the quest for rewards points for goods/services.
In addition, a 2008 survey by the Aite Group, a financial and technological research firm, found rewards are the second most important reason consumers choose one card over another, and many consumers own multiple rewards cards. Marketing research firm ComScore also did a study in 2008 that indicated two-thirds of consumers would consider changing cards, if the card was available and the rewards they value were better.
How Credit Card Rewards Impact Merchants
Rewards and miles programs come with an additional cost to the merchant though. The discount rate a merchant pays on these types of cards can be 2% higher than the qualified rate they normally pay on personal credit or debit card. Taking into consideration this means the total discount rate could be 4%-5% it’s critical a merchant factors this in when they price their products or services. Rewards and miles cards can drive additional sales for your business but there is a cost to it.
Currently processing? Do you know what your rate is on rewards and miles cards? Take advantage of our complementary merchant account review (rate analysis). Fax in one of your most recent statements to 312-896-5628, provide us with a good day & time to call. One of our pricing specialists will contact you and break out your current rates. There is a good chance we’ll be able to save you up to 25% on your current fees by customizing a rate plan specifically tailored for your business.
Now is the time to improve your bottom line! Contact us today at 888-383-8056.
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