Faculty News

Professor Samuel Craig explains how credit card companies effectively use cash back offers

WalletHub logo
Excerpt from WalletHub -- "There are hundreds of millions of credit cards issued in the US and most people with a credit card have multiple pieces of plastic in their wallet. To successfully launch a new card into a crowded market you need a gimmick. Another card simply offering 2% cashback would get lost. But a card with a gimmick of 1% on purchases and 1% on payments is different. The segment may not be that large but it is better than being unsuccessful. Although for the issuer it is a bit counter-intuitive as the banks make most of their money on people who carry a balance and pay the high rates of interest. Giving people an incentive to pay right away eliminates the interest charge revenue stream."

Read More