Credit card reform has finally taken place. Recently the government has imposed a series of laws and practices in the hope of protecting consumer interest. But with every sliver of good news, there tends to be a bit of bad. In this case, the negative comes in the form of credit card reward programs becoming less rewarding for cardholders.
If your FICO score is under 620, brace yourself. Tempting offers for are going to be far and few between. Freebies will vanish, your interest rates will spike and you will have reduced credit lines. Only those who have taken the steps to properly establish their credit history will barely notice the change. In general, those changes may include some of the following things:
Less Rewards
If you got used to earning three points for every dollar spent on your card, expect it to revert back to a one-for-one basis. Banks earn interchange fees for each signed merchant transaction and that money offsets the reward programs.
|
Instead of reducing those front-end numbers, the back end is being tweaked and lighter reward programs are the result.
Primed for Success
After the recent credit and mortgage debacle, credit card issuers are less willing to take risks. Issuers are seeking customers who either have prime (FICO range 700-749) to super prime (FICO 750+) status. Those guys will get the best reward program offers, while the rest will struggle to find truly great card offers.
Annual Fees
Until recently, no annual fee reward credit card offers were plentiful. However, declines in consumer spending have left issuers with budget gaps that must be filled. That dollar amount will be passed on to consumers and annual fees are just one way of doing so.
New Fees
Consumers can expect additional fees not legally restricted by credit card reform. Those who do not actively use their cards may get hit with “inactivity fees” or if you are a less than perfect with your payment, your rewards points may be forfeited.
Less Point Packed Punch
Point values are set to decline. What used to cost you 50,000 miles may cost you 75,000 now as card issuers are making redeeming points more challenging to hedge their potential losses.
If you are concerned about losing the perks associated with your credit card, it is imperative that you review every piece of correspondence from your card issuer to ensure you stay on track. Additionally, by taking simple steps now to improve your credit score, you can up your status and get yourself back to a position of being rewarded.