NEW YORK—The ultra-premium rewards have turned into “financial albatrosses,” according to a new report.
“Big banks calculated that giant rewards would make consumers spend more, earning the banks more interest and boosting their returns. They calculated wrong,” stated the Wall Street Journal.
Consumers have figured out how to “game” the system, spending just enough to earn generous sign-up bonuses-then abandoning the cards in a drawer, the Journal stated.
After ratcheting up the perks for several years, banks hit peak rewards frenzy about two years ago. Now banks face increasing costs associated with the cards, the newspaper noted.
Rewards costs grew an average of 15% in the third quarter of 2018 from a year earlier at Bank of America, Citigroup, JPMorgan, U.S. Bancorp and Wells Fargo, according to bank analyst Charles Peabody.