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 Europe’s Demographic Future. Where the Regions Are Heading after a Decade of Crises
10.08.2017 | Berlin-Institut für Bevölkerung und Entwicklung

nachricht Scientists reveal source of human heartbeat in 3-D
07.08.2017 | University of Manchester

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: Fizzy soda water could be key to clean manufacture of flat wonder material: Graphene

Whether you call it effervescent, fizzy, or sparkling, carbonated water is making a comeback as a beverage. Aside from quenching thirst, researchers at the University of Illinois at Urbana-Champaign have discovered a new use for these "bubbly" concoctions that will have major impact on the manufacturer of the world's thinnest, flattest, and one most useful materials -- graphene.

As graphene's popularity grows as an advanced "wonder" material, the speed and quality at which it can be manufactured will be paramount. With that in mind,...

Im Focus: Exotic quantum states made from light: Physicists create optical “wells” for a super-photon

Physicists at the University of Bonn have managed to create optical hollows and more complex patterns into which the light of a Bose-Einstein condensate flows. The creation of such highly low-loss structures for light is a prerequisite for complex light circuits, such as for quantum information processing for a new generation of computers. The researchers are now presenting their results in the journal Nature Photonics.

Light particles (photons) occur as tiny, indivisible portions. Many thousands of these light portions can be merged to form a single super-photon if they are...

Im Focus: Circular RNA linked to brain function

For the first time, scientists have shown that circular RNA is linked to brain function. When a RNA molecule called Cdr1as was deleted from the genome of mice, the animals had problems filtering out unnecessary information – like patients suffering from neuropsychiatric disorders.

While hundreds of circular RNAs (circRNAs) are abundant in mammalian brains, one big question has remained unanswered: What are they actually good for? In the...

Im Focus: RAVAN CubeSat measures Earth's outgoing energy

An experimental small satellite has successfully collected and delivered data on a key measurement for predicting changes in Earth's climate.

The Radiometer Assessment using Vertically Aligned Nanotubes (RAVAN) CubeSat was launched into low-Earth orbit on Nov. 11, 2016, in order to test new...

Im Focus: Scientists shine new light on the “other high temperature superconductor”

A study led by scientists of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science in Hamburg presents evidence of the coexistence of superconductivity and “charge-density-waves” in compounds of the poorly-studied family of bismuthates. This observation opens up new perspectives for a deeper understanding of the phenomenon of high-temperature superconductivity, a topic which is at the core of condensed matter research since more than 30 years. The paper by Nicoletti et al has been published in the PNAS.

Since the beginning of the 20th century, superconductivity had been observed in some metals at temperatures only a few degrees above the absolute zero (minus...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Call for Papers – ICNFT 2018, 5th International Conference on New Forming Technology

16.08.2017 | Event News

Sustainability is the business model of tomorrow

04.08.2017 | Event News

Clash of Realities 2017: Registration now open. International Conference at TH Köln

26.07.2017 | Event News

 
Latest News

Molecular volume control

22.08.2017 | Life Sciences

When fish swim in the holodeck

22.08.2017 | Life Sciences

Biochemical 'fingerprints' reveal diabetes progression

22.08.2017 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>