Cash-back cards lead consumers to take on additional debt
By Credit.com Staff
Consumers who have a cash-back rewards card that pays them 1 percent on all the purchases they make earn an average of $25 a month, according to a new report from the Federal Reserve Bank of Chicago. However, cardholders also spend $68 more on these than they did on other cards, and accrue an extra $115 in credit card debt per month.
In some cases, the desire to earn cash back is so great that about 11 percent of those who hadn't used a credit card at all in the last three months admitted spending at least $50 on their new account the during the first month, the report said.
In recent months, credit card lenders have begun sending out more offers for cash-back rewards credit cards in hopes that consumers will be enticed into opening these accounts. Often, consumers will use these cards to purchase necessities, such as groceries and gas.