I have a decent number of credit cards, but most of them are cards that I opened and just used to hit the minimum spend, claim my signup bonus, and then go back to using my regular credit card that has the best day to day rewards (I also only open cards that waive my annual fee, and cancel any that try to make me pay to keep it open. Keeping them open for free is good for my credit utilization and age). Sometimes, however, a specific card will offer 5x (or something similar) on certain categories for a limited time. If I could give Wallaby detailed information about how I value rewards, it would be nice to just have one card that I carry around.

I pay all my credit cards off monthly, and basically treat them as cash (so I'm not the target consumer of a rewards card, I know).

You are one of the smart ones. You're currently subsidized by the "dumb" ones. If everyone becomes smart, the maximum possible reward will decrease.

This is true. However, the point of these offers is to rope in people who think of credit cards as "free money." I don't think Wallaby will drastically reduce the number of marks for these companies, since the people using Wallaby are going to skew smarter.

Majority* of people I know that use credits cards and pay minimum required amount are not dumb people. If anything they do not have a choice. Living from payday to payday will do that to you. Unexpected event? Time to pull out that credit card. It sounds so easy to just bunker down and break the cycle, but then whammy unexpected event.

* I might be biased in terms of people I know.

The people in my life who live payday to payday overspend, but don't see it that way. They need an iPhone!

I do precisely the same.

Isn't the interchange fee higher on some rewards cards?

A little bit on higher-end rewards cards. But those typically dish out better rewards too.

See the rates here: http://usa.visa.com/merchants/operations/interchange_rates.h...

Santander UK give 3% on fuel, 2% on department stores and 1% on household bills. It looks like Lloyds are going to introduce a similar scheme soon too.

Read the fine print. There's a £24 annual fee, fuel rewards are capped at £9/month, and you only get rewards at select stores which they have no doubt negotiated a promotional deal with.

Meanwhile UK interchange is no more than 1%.

Perfect example of what I'm talking about. Those figures are based on a certain model of reward utilization which is retarded by rules and limits. If that model changes and more people exploit the reward program, the program will change. The math has to add up.

The low interchange fee would appear to make these programs more viable in Europe, not less. The interchange fee is an operating cost that US banks cannot avoid. If they're giving me 1% back, and they're paying 1.65%, that's a net cost of 2.65% Take the same program in Europe, where transaction fees are < 1%, and the maximum cost to the bank is 2%; probably less.

The prevalence of these programs in the US would have to be attributed to some other factor(s). I'd posit that it is due to the American obsession with credit, and the intense pressure for growth in the US financial industry.

Interchange is the money the bank that issued the card gets from the merchant's bank. It's income, not expense, for that bank.

Ah, that makes sense. Thanks for the clarification.

Yes, I should have mentioned those rules.

The point I was trying to make was that we don't have as many rewards programs in Europe because we're behind curve, and they are starting to appear, not because of low interchange.

But those restrictions are significant and prove that low interchange is a big factor. It's why the only way to do it in Europe is with even more tricky rules and promotional deals, which limits its appeal.

For example, my Chase Sapphire card gives me 1% cash back everywhere and 2% on restaurants.. all of them. Whereas Santander only offers it at certain chain stores. That's because of interchange.

Santander 1-2-3 is quite a gimmick. Here's a list of participating retailers:

http://www.santander-products.co.uk/banking/calculator/cashb...

So, none of my water, fuel, energy, mortgage or communications providers qualify.

Under the hood it's a promotional scheme with certain big companies.