The End of Credit Card Rewards?

You may want to spend those points while you still can.

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Today's guest post comes from Curtis Arnold, author of How You Can Profit From Credit Cards and founder of CardRatings.com:

Credit card reward programs, which give consumers everything from free airline tickets to espresso makers to spa treatments, may be on their way out.

Scott Bilker, Founder of DebtSmart.com, suggests, "Banks are definitely cutting back. Many of my readers have written in with stories of their rewards ending. The interesting thing is that merchants pay more because of the rewards so you would think that banks would keep them in place. I'm not sure if these programs will return when the economy improves. By that I mean they will be back but probably not work the same way. Maybe there will be more fees or other catches that make them less beneficial to consumers." Scott Crawford of Goalspring Financial offers this: “It's unlikely that rewards will improve significantly when the economy rebounds. First, the economy has accelerated a general shift away from credit to debit cards and the fees on these accounts supports a different reward structure.  With the credit crisis, card issuers have shifted to focus on higher-quality card customers. These customers have a higher proportion of transactions without carrying a balance.  As a result, card issuers may not be able to afford high levels of rewards to these customers.  The exception is high-quality revolvers.  In this elusive segment, competition could be fierce, with issuers seeing rewards as an opportunity to expand share.” 

So, the million dollar question is, What can you do to preserve the value of your rebate program? Here are some suggestions:

  • Check your rewards program. When was the last time you checked the terms? Even if it hasn’t changed, I still strongly suggest that you take a hard look at your rewards program at least once a year and compare your current card to other offers -- CardRatings.com is a great place to do this.
    • Be aware of your personal rewards requirements and any recent changes to your rewards program. Have there been any time constraints inserted, administrative costs added, or devaluation changes?
      • Don’t “bank” rewards points or miles. In other words, don’t save your points or miles for a big ticket item. In a worse case scenario, your program could go belly-up and you suddenly could be left with a lot of points that are worthless. In this environment, it is more prudent to redeem your points for smaller items requiring less points.
        • If your reward program has diminished, call your issuer to complain. The old adage the squeaky wheel gets the grease definitely applies here.
          • If your complaints to your issuer fall on deaf ears, then take your business elsewhere. You aren’t married to your credit card and there is likely another card out there that you will be just as happy with…if not happier.
          • While there is a lot of negative buzz about this topic, on the flip side, it is worth noting that there are still some great reward card offers on the market that haven’t made any cuts. My tried and true Blue Cash Card from American Express (the card of choice in my wallet for several years) still offers my wife and I a full 5 percent back on our grocery, gas and drug store purchases and 1.5 percent back on everything else once we spend $6,500 on the card. And, ironically, Fidelity and Schwab both launched new rebate programs in December that are very aggressive. They both offer rebates at the 2 percent level.

            The bottom line is that despite all the bad news, it looks like reward programs are here to stay…at least for the near term. So I say that we all make hay while the sun shines!