The value of credit card benefits
DOI:
https://doi.org/10.61190/fsr.v19i3.4976Keywords:
Frequent flier miles, Credit cardsAbstract
Banks offer various economic incentives to customers to pay with their credit card rather than cash. Still, many individuals either elect to pay with cash or are unable to acquire credit cards. What benefits do these people lose by paying in cash rather than credit card? This paper demonstrates two opportunity costs associated with cash payments-frequent flier miles and payment float. Under most scenarios, the opportunity cost of cash payments versus benefit accruing credit cards is large. For example, individuals or businesses charging $5,000 each month can realize a present value opportu nity cost of more than $19,000 over a five-year horizon. The results help banks optimize their offerings and individuals optimize their payment patterns.
Downloads
Published
Issue
Section
License
Copyright (c) 2010 Academy of Financial Services
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Author(s) retain copyright and grant the Journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows to share the work with an acknowledgment of the work's authorship and initial publication in this Journal.
This license allows the author to remix, tweak, and build upon the original work non-commercially. The new work(s) must be non-commercial and acknowledge the original work.
