Consumers love racking up rewards points on their credit cards, and credit card companies are beginning to use that to their advantage by steering them toward purchasing specific products. American Express is beginning a program that will let stores pass on rewards to customers if they buy certain items.
To start, Amex is beginning its program with the online store, Boxed. So if Boxed customers use an Amex card to buy certain products, including Cheerios breakfast cereal, Planters nuts, or Dove soap, they will earn extra rewards points, the Memphis Daily News reported.
This is just the start of the program. Amex is reportedly planning to apply the news rewards rate to certain products from almost all stores that accept Amex cards. With some merchants refusing to accept Amex cards due to high processing fees, this rewards program may offer businesses an incentive to work with Amex in order to access customers with American Express credit cards.
A rewards program is pretty common; there are plenty of rewards credit cards out on the market. In the past, these rewards cards offered cash back on certain purchases like hotels nights, groceries, restaurants, or gas. However, this new Amex rewards program is doing somewhat different (but not entirely new), which is offering a separate rewards rate for particular items throughout a store.
This could be a powerful marketing tool for businesses because Amex may let vendors choose what items will bring in extra rewards points – although controversial items like guns, alcohol, and tobacco won’t be allowed. If they have trouble moving an item and don’t want to end up with a lot of the back stock, they could essentially launch a sale via Amex rewards program.
What Consumers Should Keep in Mind Before Biting on This
An incentive is only a good deal for consumers if they are using their credit cards to purchase something they would ordinarily buy anyway. Even if you earn rewards from spending, it’s still a detriment if you can’t pay off the full balance each month.
Consumers who buy certain products just to earn extra rewards points might still spend more than they ever needed. For example, some of the name brands offered by the merchants who will team up with Amex could just be more expensive alternative to a generic brand. It might not be advisable to look for one or two percent cash back on a name-brand product when you can just buy a generic brand at a 10 to 20 percent discount.
Unless a consumer has a specific brand loyalty – for instance, they don’t think any other cereal is as tasty as Cheerios so they won’t buy any other kind – it makes financial sense to buy a cheaper generic brand. The money they would save from consistently buying off-brand products could add up quicker than extra rewards point payout would.
Author: Shannon Serpette
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