Fewer rewards for those who buy

Two major credit-card programs are preparing to scale back bonuses paid to consumers for gasoline and other purchases

Your Money

September 12, 2006|By Harriet Johnson Brackey | Harriet Johnson Brackey,South Florida Sentinel

FORT LAUDERDALE, Fla. -- If you balance the pain of paying sky-high gasoline prices against the cash bonuses you get by charging your fill-ups on one of those gasoline rewards credit cards, the trade-off is about to end.

Extra rewards points for gasoline and other everyday purchases will soon disappear from two major credit-card programs. "And we fully expect a cutback industrywide," said Bill Hardekopf, chief executive officer of LowCards.com, a Web site that compares credit-card offers.

Citigroup said last month that it would slash by more than half the cash rewards it pays to holders of the Citi Dividend MasterCard on purchases at gas stations, groceries and drugstores. The 5 percent cash back will soon be 2 percent. American Express, too, will end double cash-back points paid on "everyday" purchases to cardholders in its Membership Rewards program starting in October.

"We knew they wouldn't be around forever," said Curtis Arnold, the founder of CardRatings.com, a Web site where consumers rate credit-card deals.

Hardekopf said credit-card issuers are not losing money on the rewards programs, "but it wasn't as profitable as other areas, so they've started to cut back."

Goal is reached

Gasoline sellers, meanwhile, haven't announced major rewards program cuts on their cards. But Arnold said the major credit-card companies have pretty much achieved their goal of getting consumers to use their credit cards very often, for purchases big and small. Merchants pay the card companies a fee for each transaction.

"If the merchants are paying 2 or 3 percent, Citibank can't afford to give you 5 percent, unless Citi gets the money by some other means such as fees or off your revolving balance," he said.

Indeed, Visa USA reported recently that those small-ticket items in the first half of this year added up to $27.3 billion in sales. The company said its volume of purchases of less than $25 on both Visa credit and debit cards was 17 percent higher in the first six months of this year compared with 2005.

The recent announcements are a scaling-back of rewards, not the end of the programs.

In fact, card companies are churning out new variations on their bonus programs even as they cut back on gasoline rewards. Citi will continue to pay 1 percent cash back on most purchases on its Dividend MasterCard, up to $300 a year. And the 2 percent cash-back offer has been extended to new categories, such as purchases at convenience stores and utility bills that are paid using the Citi card.

At the same time, Citi said purchases with a group of 300 selected merchants will be eligible to receive 5 percent to 7 percent cash back, with no annual limit. Among the retailers in Citi's Dividend Merchant Network are Sears and Linens N Things.

American Express is ending its four-year-old program of paying double points in its Membership Rewards program for purchases at supermarkets, drugstores and gas stations. At the same time, customers will still get single points as rewards. And those who use the Delta Sky Miles card and the Blue Cash card can still get double points for gasoline purchases, with certain limits.

If you have a rewards card, Arnold suggests that you watch your mail closely for any notice of changes in the program. If your rewards are cut, "Don't throw up your hands. There are a lot of other rewards cards out there," he said.

But read the fine print when shopping around to make sure the whole deal is good, Hardekopf advises.

`They'll cut back'

"They'll give you this awesome reward on gas purchases, usually for the first 30 or 60 or 90 or 120 days," he said. "And then once they have you, they'll cut back."

Citgo, for example, is offering a Citi Platinum Select Citgo Mastercard that rebates 50 cents a gallon on purchases during the first 60 days after the account is opened. The offer is good through Oct. 31. Customers can get a maximum rebate of $50 a month. The card has no annual fee.

Discover has a Platinum Gas Card that offers 5 percent back on gasoline purchases up to $1,200. The card has no annual fee.

Harriet Johnson Brackey writes for the South Florida Sun-Sentinel.

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