I have discussed in the past that being that I am not out of debt, a rewards card is not a good decision…right now, but every so often I think about the rewards associated with credit cards. Regardless of my personal situation, I found an interesting article  in Wall Street Journal titled, “Credit Cards Help You Save, Cut Debt” by Jane Kim

Two Credit Card Rewards Program

Ms. Kim highlights two cards:

Wells Fargo & Co. is rolling out cash-back credit cards that automatically apply the rebates to pay down loan balances at the bank, while Fidelity Investments unveiled a new Retirement Rewards Card that will apply a 2% rebate earned on purchases to a Fidelity Individual Retirement Account.

I often think about reward cards, about why they exist? Credit cards literally exist for you, the average American, to carry a debt.

Credit Card Rewards are Not Worth it for the Average American

Found some really cool stats here….here are a few of the ones I found interesting.

  • 55 percent of credit card users keep a balance on their credit card, up 2 percent from 2007. (Source: ComScore, September 2008)
  • The average American with a credit file is responsible for $16,635 in debt, excluding mortgages, according to Experian. (Source: U.S. News and World Report, “The End of Credit Card Consumerism,” August 2008)
  • 76 percent of undergraduates have credit cards, and the average undergrad has $2,200 in credit card debt. Additionally, they will amass almost $20,000 in student debt. (Source: Nellie Mae, “Undergraduate Students and Credit Cards in 2004: An Analysis of Usage Rates and Trends.”)
    * Average credit card debt among indebted young adults increased by 55 percent between 1992 and 2001, to $4,088. (Source: “Generation Broke: Growth of Debt Among Young Americans”)
  • The average credit card indebted young adult household now spends nearly 24 percent of its income on debt payments, four percentage points more, on average, than young adults did in 1992. (Source: “Generation Broke: Growth of Debt Among Young Americans”)
  • Among the 35 percent of college students with credit cards that do not pay their balances in full every month, the average balance is $452. This is down 19 percent from 2007. Moreover, this balance is approximately one-third the size of the average balance for active non-student young adult accounts and one-fourth the size of active accounts for older adults. (Source: Student Monitor annual financial services study, 2008)
  • Approximately 74.9 percent of the U.S. families surveyed in 2004 had credit cards, and 58 percent of those families carried a balance. In 2001, 76.2 percent of families had credit cards, and 55 percent of those families carried a balance. (Source: Federal Reserve Bulletin, February 2006.)
  • Total U.S. consumer debt (which includes credit-card debt and non-credit-card debt but not mortgage debt) reached $2.55 trillion at the end of 2007, up from $2.42 trillion at the end of 2006. (Source: The Nilson Report)
  • Total U.S. consumer revolving debt reached $962 billion in May 2008, up from $879 billion at the end of 2006. About 98 percent of that debt was credit card debt. (Source: Federal Reserve)
  • The majority of U.S. households have no credit card debt. (Source: Federal Reserve Board survey of consumer finances, 2004)
  • Of the households that do owe money on credit cards, the median balance was $2,200 — meaning half owe more, half less. (Source: Federal Reserve Board survey of consumer finances, 2004)
  • Only 8.3 percent of households owe $9,000 or more on their cards. (Source: Federal Reserve Board survey of consumer finances, 2004)
  • National average credit card debt per credit card borrower is $1,673. (Source: TransUnion, June 2008)
  • About 40 percent of credit cardholders carry a balance of less than $1,000. About 15 percent are far less conservative in their use of credit cards and have total card balances in excess of $10,000. When you look at the total of all credit obligations combined (except mortgage loans), 48 percent of consumers carry less than $5,000 of debt. This includes all credit cards, lines of credit and loans — everything but mortgages. Nearly 37 percent carry more than $10,000 of nonmortgage debt as reported to the credit bureaus. (Source: myfico.com)
  • The typical consumer has access to approximately $19,000 on all credit cards combined. More than half of all people with credit cards are using less than 30 percent of their total credit card limit. Just over one in seven is using 80 percent or more of their credit card limit. (Source: myfico.com)
  • The average college graduate has nearly $20,000 in debt; average credit card debt has increased 47 percent between 1989 and 2004 for 25-to 34-year-olds and 11 percent for 18-to 24-year olds. Nearly one in five 18-to 24-year-olds is in “debt hardship,” up from 12 percent in 1989. (Source: Demos.org, “The Economic State of Young America,” May 2008)
  • 28 percent of those surveyed say their ability to pay off their credit card balance has become more difficult. (Source: Javelin Strategy & Research, “Credit Card Issuer Profitability in a Difficult Economy,” July 2008)

Two words – Scary Sh!T.  With the above stats laid out there, what the hell is the 2% Fidelity or Wells fargo offering?  For most Americans, this is not free money being left on the table, this is simply a ploy to get you to spend money.  It is no different than a coupon for a product which you would not normaly purchase.

One day (in the near future), I hope to have zero consumer debt, and when I do so, the wife and I will talk about which rewards card is good for us when we prove to ourselves that we can pay the balance IN FULL.  My in-laws take advantage of programs from capital one, where, they pay the balance IN FULL EVERY MONTH, and have received multiple vacations from doing so, however, they don’t seem to be the norm.

What about my readers do you guys take advantage of reward points? If so, why? Are you carrying a balance?