Final answer:
Customers who utilize bonus points from credit-card companies on purchases tend to spend less than purchasing at retail prices. It is, however, important to consider potential interest rates that could negate these savings if balances are not paid in full. Buying on credit has played a significant role in consumer history, offering access to goods without immediate payment but with the risk of debt.
Step-by-step explanation:
When a credit-card company awards bonus points to its customers, and those points can be used for purchasing brand name merchandise at prices lower than the manufacturers' suggested retail prices, it implies that customers who use these points indeed spend less than if they would have purchased the same merchandise in retail stores.
This aligns with the broader concepts of savings and credit cards, where consumers utilize credit card rewards to make future purchases more affordable. This strategy of saving through bonus points is a representation of good debt, as it reduces the cost of ownership for such items.
However, it is essential to understand the cost of carrying a balance on a credit card, which is usually quantified by an interest rate. An interest rate is what the borrower pays for the privilege of borrowing money, usually expressed as an annual percentage of the outstanding balance. Thus, while reward programs may offer savings on purchase, the benefits can be outweighed by high-interest rates if balances are not paid promptly.
The concept of buying on credit is not new. It has been a part of American consumerism since the emergence of the middle class and the growth of consumer culture, where buying on credit allowed people to enjoy a better lifestyle, as described in Roland Marchand's 'Parable on the Democracy of Goods'. Nevertheless, the risk of falling into debt is substantial if credit is not managed wisely.