Banks Pulling Back on Rewards Credit Cards
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. All those rewards credit cards issued by the banks have delivered enormous benefits to consumers. Well, now the banks are saying, hold on, and they're starting to pull back on the frills. We'll explain why in a moment. First, these money and market stories you should know. It's a lot cheaper to fill up at the gas pump. The Energy Department says gas prices on December 31st were down by 25 cents a gallon as compared to a year earlier. The Wall Street Journal Hurdle on the Street team quotes Jason Bordoff.
What is causing banks to pull back on rewards credit cards?
He's founding director of Columbia University's Center on Global Energy Policy. as crediting a fall in gas prices in part to President Trump taking a less strict approach to Iranian sanctions. Meanwhile, the folks at gasoline price tracker GasBuddy say the price at the pump could jump by as much as 35 percent as soon as May, with output cuts by major oil producers expected to boost the price of oil. And the latest casualty of the government shutdown could be your tax refund from the IRS showing up in a timely fashion. During a shutdown, the IRS can continue activities that protect government property, and the agency may bring in more workers soon to prepare for the income tax filing season. Now, the IRS hasn't announced a start date yet for the 2019 filing season.
That's the first under the tax law that Congress passed two years ago. Even during a shutdown, the agency still processes some tax returns that include payments and keeps computer systems running and continues criminal investigations. But the IRS generally does not conduct audits, respond to taxpayer questions outside the filing season, or pay refunds.
For the past few years, banks have gone out of their ways asking us things like, what's in our wallet? And be sure to sign up for their rewards-rich credit cards. Well, now the tide is turning, and those rewards may not be around for long. Wall Street Journal reporter Ana Maria Andriotis is here with some details.
How are current gas prices and economic signals framing the consumer money story?
So, Ana Maria, this is an area of fierce competition among banks.
And it has been an area of fierce competition for several years now. Some of the biggest banks in the country have been going head-to-head, JP Morgan, Citigroup, American Express is one of the largest card issuers as well. They've really been going head-to-head trying to figure out what are the most generous points and other reward offerings they can put out there to get as many card users as possible.
Seems like everyone is coming for American Express's Platinum card. That's sort of set the standard for rewards and benefits?
That became the focus point for several of American Express's competitors in recent years. And really the peak of credit card rewards mania occurred in late 2016, somewhere between there and early 2017, when J.P. Morgan opened. had the Sapphire Reserve card with 100,000 points for people who received the card and spent a few thousand dollars in the first few months. And that, by many card executives, was looked at as how could they even do that? That is such a rich offer. How could it make financial sense for the bank?
Well, it made financial sense for the consumers. They ran out of cards. They couldn't produce the cards fast enough.
Correct. And essentially what we've seen playing out even since then is that consumers are very savvy with how they're using credit cards and they have oftentimes many cards that they have with them and they strategize. what purchases to put on what cards in order to earn the maximum number of points or the most cash back possible. And banks are facing a situation where certainly, of course, they're still making money from credit cards. That goes without saying, but that the returns on cards are declining and they've been declining for a few years now. One reason for that is because of the rewards costs, which are rising. And they're rising because you have a bunch of savvy consumers who are using these cards to get the maximum benefits out of them, not carrying balances.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:05–0:35
2
What is causing banks to pull back on rewards credit cards?
0:35–2:03
3
How are current gas prices and economic signals framing the consumer money story?
2:03–5:31
4
How could a government shutdown delay your IRS tax refund?
5:31–9:43
5
Which banks have driven the credit-card rewards arms race and why?
9:43–11:04
Speakers
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