Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Cuts to rewards plans unlikely to hurt credit card use

22.07.2009
What would happen if credit card holders no longer received rewards? Not much – but it could cut consumer credit card debt, says a new study on the impact of rewards programs on credit and debit card use.

The paper, co-published by the University of Toronto's Rotman School of Management, found that removing rewards would result in only a small number of credit card customers switching to more debit card and cash transactions.

"A lot of customers use credit cards or debit cards to pay because they like it. So if you take away the rewards, it's not going to change their behaviour that much," says Andrew Ching, a Rotman professor who co-wrote the study with Fumiko Hayashi of the Federal Reserve Bank of Kansas City. "Potentially, it could be better for everybody."

The study used data on consumer payment preferences from the American Bankers Association and Dove Consulting. Researchers also found that rewards programs encouraged consumers to use credit cards even when they carried balances – suggesting eliminating rewards could help reduce consumer debt.

The findings are particularly relevant as more governments consider consumer protection legislation and rules prohibiting credit card companies from covering the costs of their reward programs through interchange fees charged to merchants each time a customer uses plastic to pay.

The paper's findings are backed up by what happened in Australia when that country's government ordered credit card companies to reduce their interchange fees in 2003. Australia's big three credit card companies have since dramatically reduced their rewards programs. Market share has been slightly reduced but credit card transactions have increased.

The complete study is available at: www.rotman.utoronto.ca/newthinking/creditcards.pdf

For the latest thinking on business, management and economics from the Rotman School of Management, visit www.rotman.utoronto.ca/NewThinking.

The Rotman School of Management at the University of Toronto is redesigning business education for the 21st century with a curriculum based on Integrative Thinking. Located in the world's most diverse city, the Rotman School fosters a new way to think that enables the design of creative business solutions. The School is currently raising $200 million to ensure Canada has the world-class business school it deserves. For more information, visit www.rotman.utoronto.ca.

For more information:
Ken McGuffin
Manager, Media Relations
Rotman School of Management
University of Toronto
Voice 416.946.3818
E-mail mcguffin@rotman.utoronto.ca

Ken McGuffin | EurekAlert!
Further information:
http://www.utoronto.ca

More articles from Studies and Analyses:

nachricht New study: How does Europe become a leading player for software and IT services?
03.04.2017 | Fraunhofer-Institut für System- und Innovationsforschung (ISI)

nachricht Reusable carbon nanotubes could be the water filter of the future, says RIT study
30.03.2017 | Rochester Institute of Technology

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Wafer-thin Magnetic Materials Developed for Future Quantum Technologies

Two-dimensional magnetic structures are regarded as a promising material for new types of data storage, since the magnetic properties of individual molecular building blocks can be investigated and modified. For the first time, researchers have now produced a wafer-thin ferrimagnet, in which molecules with different magnetic centers arrange themselves on a gold surface to form a checkerboard pattern. Scientists at the Swiss Nanoscience Institute at the University of Basel and the Paul Scherrer Institute published their findings in the journal Nature Communications.

Ferrimagnets are composed of two centers which are magnetized at different strengths and point in opposing directions. Two-dimensional, quasi-flat ferrimagnets...

Im Focus: World's thinnest hologram paves path to new 3-D world

Nano-hologram paves way for integration of 3-D holography into everyday electronics

An Australian-Chinese research team has created the world's thinnest hologram, paving the way towards the integration of 3D holography into everyday...

Im Focus: Using graphene to create quantum bits

In the race to produce a quantum computer, a number of projects are seeking a way to create quantum bits -- or qubits -- that are stable, meaning they are not much affected by changes in their environment. This normally needs highly nonlinear non-dissipative elements capable of functioning at very low temperatures.

In pursuit of this goal, researchers at EPFL's Laboratory of Photonics and Quantum Measurements LPQM (STI/SB), have investigated a nonlinear graphene-based...

Im Focus: Bacteria harness the lotus effect to protect themselves

Biofilms: Researchers find the causes of water-repelling properties

Dental plaque and the viscous brown slime in drainpipes are two familiar examples of bacterial biofilms. Removing such bacterial depositions from surfaces is...

Im Focus: Hydrogen Bonds Directly Detected for the First Time

For the first time, scientists have succeeded in studying the strength of hydrogen bonds in a single molecule using an atomic force microscope. Researchers from the University of Basel’s Swiss Nanoscience Institute network have reported the results in the journal Science Advances.

Hydrogen is the most common element in the universe and is an integral part of almost all organic compounds. Molecules and sections of macromolecules are...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Dortmund MST Conference presents Individualized Healthcare Solutions with micro and nanotechnology

22.05.2017 | Event News

Innovation 4.0: Shaping a humane fourth industrial revolution

17.05.2017 | Event News

Media accreditation opens for historic year at European Health Forum Gastein

16.05.2017 | Event News

 
Latest News

New approach to revolutionize the production of molecular hydrogen

22.05.2017 | Materials Sciences

Scientists enlist engineered protein to battle the MERS virus

22.05.2017 | Life Sciences

Experts explain origins of topographic relief on Earth, Mars and Titan

22.05.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>