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<p>Consumers have been using credit cards to pay for expenses for nearly seven decades, but the addition of rewards programs has significantly increased the number and variety of credit cards found in the average consumer&#8217;s wallet.</p><p>Some are drawn to travel cards while others prefer the chance to earn cash back on everyday purchases. Nearly all rewards credit card issuers <a href="https://www.nerdwallet.com/rewards-credit-cards" target="_blank">offer incentives</a> to card users to make the idea of spending on credit more appealing. Rewards like points or miles are easily redeemed for travel deals, discounts at retailers and merchants, and even cold hard cash &#8211; the more a rewards credit card is used, the more card members have an opportunity to cash in.</p><p>Over the years, credit card issuers have adapted to the growing needs of consumers regarding their credit card rewards; spenders want multiple ways to rack up rewards, flexibility in redemption, and no expiration in sight. There are now even multiple card options for consumers with a penchant for exclusivity, with rewards catered toward high-earners and big spenders. While card issuers have met the demands of consumers steadily over the last few years, notable shifts toward reducing special rewards, such as sign-on bonuses and authorized user additions, are starting to come to fruition.</p><p><strong>The Case of Chase Sapphire Reserve</strong></p><p>In late summer 2016, Chase, a powerhouse in the rewards credit card market, launched the Chase Sapphire Reserve credit card. The new offering from the popular credit card issuer aimed to allure a specific type of consumer &#8211; one who has the spending capacity to not only cover the relatively high annual fee but to take advantage of the high brow rewards big spending affords. The Sapphire Reserve card comes with a hefty $450 annual fee, but most reviewers state the fee is a drop in the bucket when compared to what the credit card offers in return.</p><p>Rewards with the Chase Sapphire Reserve credit card are some of the most robust in the industry. Cardmembers have the opportunity to earn three points for every dollar spent on travel or dining, and one point per dollar spent on all other purchases. While that&#8217;s similar to a handful of other rewards credit card programs, cardmembers get a slew of additional perks. Benefits include a $300 travel credit each year (automatically applied to any travel-related purchases), unlimited access to airport lounges across the globe, and a redemption value of 1.5 cents when rewards are used to make a purchase through the Chase Ultimate Rewards portal.</p><p>If these benefits weren&#8217;t enough, cardmembers have the opportunity to earn a 100,000 rewards bonus when they spend at least $4,000 on the card within the first three months after opening an account. The sign-on bonus represents yet another way to entice credit card users to make the switch from another rewards card or to open a rewards credit card in the first place. Chase received so many applications for the Sapphire Reserve card since its August launch that a representative from the card issuer reported a $200 million reduction in profit for the fourth quarter of 2016. In response to the loss of profit, Chase announced that the impressive sign-on bonus opportunity reduces down to 50,000 rewards points starting January 12, 2016. However, the same spending minimum of $4,000 is still required.</p><p><strong>The Reality of Bonus Rewards</strong></p><p>An analysis of the long-term impact of a high bonus reward for new customers revealed a stark truth for credit card issuers. For Chase, the breakeven point for the 100,000 sign-on bonus in the few short months it has been available is a painful <a href="http://www.marketwatch.com/story/america-may-have-reached-a-peak-for-credit-card-rewards-2016-12-12" target="_blank">five and a half years</a>. While the comprehensive rewards program offered to new card users helped spark a competitive advantage for the company, the near immediate loss of profit and year&#8217;s long breakeven point do not serve the card issuer well. Unfortunately, the case of Chase Sapphire Reserve&#8217;s abrupt reduction in bonus rewards is not a new plight for credit card issuers.</p><p>According to an analysis by Mintel, a global market research firm, hefty sign-on bonuses are in a state of decline. For the better part of 2015 and 2016, up-front rewards averaged $150 cash in hand to the card user; however, in the third quarter of 2016, the average fell to $138. A similar decline took place in 2011 when the average cash equivalent to sign-on bonuses was at $197; it subsequently fell to $100 shortly after its peak. Given that credit card issuers are focused on profits, not rewards, it isn&#8217;t all that surprising that large sign-on bonuses are only available for a short period. After the initial wave of interest wanes, credit card issuers are apt to pull back to keep their bottom line intact.</p><p><strong>A Rewards Crystal Ball</strong></p><p>Although credit card issuers are likely to continue offering a variety of rewards programs to new and long-standing card users, the days of unheard of sign-on bonuses may be on their way out. The future doesn&#8217;t look so bright for consumers due in part to the looming rise in interest rates. As the Federal Reserve takes steps to increase the cost at which banks, like credit card issuers, are able to borrow from the government, consumers are likely to experience two potentially negative outcomes: a higher cost of borrowing and a dramatic pullback in reward offerings. That means <a href="https://lendedu.com/blog/student-credit-cards" target="_blank">higher interest rates</a> on credit cards and far fewer upfront bonuses.</p><p>Despite the possibility of changes ahead for credit card issuers and the ultimate effect those changes may have on consumers, credit card users can still boost purchasing power by finding the best fit credit card. The Chase Sapphire Reserve card may not be the best fit for card users who only use credit occasionally or those who may not have the stomach for the high annual fee; however, hundreds of rewards credit cards are available, designed to suit a variety of card user needs. And while massive upfront bonuses may be on the decline, the ability to earn rewards on everyday purchases or major items is still, and will most likely remain, an option for consumers.</p><style>
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<div class="metaInfo"><bylineMeta><p>By Amanda Welch</p><p>LendEDU</p></bylineMeta></div>

The credit card reward landscape is changing for consumers and companies