From the Economist:

Credit Cards often provide perks to convince cardholders to sign up with them.  Two common incentives are balance transfer offers which allow new cardholders to transfer existing credit card balances over and not pay interest for a period of time.  The other perk is the bonus airline miles offered for signing up.

The Economist noted that this chart indicates the stresses being felt by the card companies as they compete for customers: 

Other woes are a function of broader forces within the industry. Americans are not as willing to carry a balance on their credit cards as they were before the crisis: the economy is now growing much faster than revolving credit, a category composed chiefly of credit-card debt. That may be partly because banks are still leery of lending to poorer Americans; instead they are competing to offer cards to the rich.

As a result, card issuers are providing bigger rebates on purchases, more frequent-flyer miles as a sign-up bonus and longer interest-free periods for those who transfer balances from other cards (see chart). Mercator Advisory Group, a consultancy, estimates that the amount of revenue from each transaction passed back to the customer has been growing for years. In 2012 it put it at 47% for three of the biggest issuers, up from 39% in 2010.

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Check out the NGPF Activity to calculate the cost of buying on credit.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.