A Credit Card For the 21st Century
So, the financial idea for the 21st century:
As of 2008, Americans carry an average of 3.5 credit cards. The average debt per household is about $16,000. That was in 2008, it’s safe to assume that these numbers have grown in the past 4 years.
Also, it’s safe to assume that most of these cards are rewards cards. Either cashback bonuses for use, airline miles, double airline miles, etc.
The problem with the number of cards people carry is a function of quantity (they don’t fit into your wallet) and how do you maximize rewards points and other variables, such as balance and interest rate.
A solution is a single system (online, of course), where you enter in each of your credit cards (a la PayPal). This system talks to your credit card companies to get the balance on your account, the interest rates, your maximum balance (including cash advance) and any rewards programs that they offer.
You’d buy something using this single credit card for every purchase. (Maybe a POS card would be a more appropriate name.) The backend system would authorize the transaction to each of your cards on file, and upon approval of one (or more), the merchant would get an approval notice and for them, the sale is complete. However, the backend system wouldn’t bill your card just yet. It’d attempt to analyze the purchase you just made.
Was it gas? If so, charge the card that offers gas rewards point or cashback. (Assuming it was approved and you have available balance, of course).
Was it food? Charge a different card that offers restaurant rewards points, instead. (Assuming the above, as well).
Were reward points available for use on one of the cards and could they be used for this purchase?
Etc. Etc. Etc.
Did you want a cash advance? Choose the card that offers the lowest cash APR of the ones you have available. Possibly splitting the charge up amongst the cards for either ease of paying off next month or for balance purposes.
A user could also set a priority for what cards get used. Such as, use the card that gives airline miles over ones that give rewards points. It wouldn’t even be terribly difficult to show the cash value of each – and which one is actually the “best” reward. The system could also make sure that no card goes “unused” for periods of time, which can negatively affect a personal credit score.
The end user benefits, especially if the system could talk to the credit card companies and enroll the customer in rewards programs. Discover, for example, changes its cash back offers every quarter. So you have to call to re-enroll in the program to get maximum benefit on certain purchases. This would automatically enroll you, and if Discover changed their 5% rewards to restaurants one quarter, instead of gas, you’d start using your Discover when you went out to eat. And a different card for gas, instead of Discover.
A nominal fee could be assessed to users. Or, the card could simply have a higher than normal discount rate at the merchant processing it. Passing the fees along to them. Rewards cards do this already; so that is not even an entirely new concept.
In addition to credit cards, gift cards could be added to this card – and since most gift cards are thrown away and not used (or not fully used!) it’d allow customers to both use these more efficiently and more completely. Other swipe cards could easily be added, as well.
This sort of system would make credit/debit card use more efficient and the customer gets more rewards in the process. Credit card companies are ensured their cards are used more often (people often forget to use given card for months at a time) and incentivizes them to offer more rewards to attract more customers. It’s a win-win for both sides of the spectrum.