The Fine Print Behind Credit Card Rewards

Consumers can lose rewards for missing payments.

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Today's guest post comes from Odysseas Papadimitriou, founder and chief executive officer of Evolution Finance, which is the parent company for Wallet Blog and Card Hub.

In the last year, 15 percent of American adults, or nearly 34 million people, have been late making a credit card payment. Additionally, the credit card default rate in 2009 was the highest it’s been since 1991. These days, many cardholders have no choice but to miss one or more of their credit card payments. However, what many consumers don’t realize is that by doing so, they may not only be damaging their credit score, but also sacrificing the benefits that their credit card reward programs offer.

While it’s true that in recent months consumers have been posing more detailed questions about the ins and outs of the terms on their credit card accounts, most of the information that’s circulating around to satisfy these questions addresses finance charges and interest rates. What about rewards?

What if all consumers knew that missing a payment on a credit card bill meant losing the rewards points that they’d planned to use to take a vacation or celebrate a special occasion? Perhaps their priorities would shift, and they’d pay that bill they’d planned to hold off on, on time.

In a study we recently conducted at, it was revealed that all of the major credit card issuers (American Express, Bank of America, Capital One, Chase, Citibank and Discover) will revoke any reward points earned in a billing cycle during which a consumer’s account is delinquent. Even more harsh are issuers Discover and American Express. If a consumer with a credit card account issued by Discover is late on their payment for two consecutive months, the issuer revokes ALL points or miles earned under the customer’s reward program. American Express reserves the right to follow suit if an account falls out of good standing, but takes this line of action on a case-by-case basis.

These rules are strict enough, but what’s worse is the fact that all of the major credit card issuers reserve the right to change the terms and conditions of their reward programs at any time, and for any reason. And if that’s not enough, the major issuers also reserve the right to cancel their reward programs at will and at any time - imagine the surprise for a consumer who has accumulated tens of thousands of points. Based on the results of our study it seems that from the issuers’ perspective, credit card reward programs are looked at as if they are perks, whereas many consumers view them as a credit card’s primary utility.

Consumers should know that they can avoid the loopholes and penalties that credit card issuers have created around their rewards programs by opting only for programs that offer cash back. With cash back rewards what you’ve earned is yours to keep, and credit card issuers cannot devalue your earned rewards in any way. Additionally, if you become unhappy with your credit card issuer or want to switch to a better credit card you do not have to worry about losing your cash back. You can simply request a check for your earned cash back rewards and then close your account at no risk.

For a large segment of consumers, the benefits offered under reward programs are the sole reason why they choose one credit card over another, and are the most important piece of a credit card’s value proposition. Unfortunately, as the rewards study revealed, most credit card issuers continue to behave without clarity and in general, they treat their rewards programs as something that their customers should feel lucky and privileged to be a part of. Instead, credit card issuers should treat their rewards programs as one of the core services that they offer to consumers. Lastly, it is important for consumers to be well informed about different credit card reward programs, and for peace of mind they should choose a cash back credit card over other rewards credit cards, whenever they can.