Sweeping Changes Are Coming to Credit Card Rewards Programs — Use Your Points Now

An expert explains what's coming next.

Savvy consumers can get a lot out of rewards credit cards — everything from cash back to free travel to mortgage and student loan payments. However, users might soon discover that some rewards programs are going to become less generous. This is because banks have heavily invested in these rewards programs but aren’t seeing enough revenue being generated to offset the costs, said Cyndie Martini, president, and CEO of Member Access Processing, the largest aggregator of card services for credit unions.

“Consumers need to be much more careful moving forward,” she said.

In recent years, card issuers have become stingier with the bonus points they offer to entice consumers to sign up for their cards. The average number of sign-up bonus points has dropped from 66,000 in 2016 to 44,000 in the first half of 2018, The Wall Street Journal reported. And even more changes could be on the way, Martini said, so cardholders need to watch for notifications from their card issuers.

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Cardholders Might Have Less Time to Redeem Points
woman walking with shopping bags during holidays

Plenty of consumers have figured out how to maximize credit card rewards to get big sign-up bonuses and quickly rack up points that they cash in for flights, hotel stays, and other freebies. However, many are just sitting on their rewards points. A report by Bond Brand Loyalty, a brand loyalty agency, found that consumers have $100 billion worth of unredeemed loyalty points, which includes points from credit card and retailer rewards programs.

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Believe it or not, that’s something credit card issuers don’t like. Financial institutions have to maintain a cash reserve equal to a certain percentage of outstanding credit card rewards points, Martini said. “Waiting for usage of points is a huge set-aside,” she said. And that money that’s set aside is money card issuers can’t touch.

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As the card issuers’ pool of cash for unredeemed points continues to grow, they will start looking for ways to get consumers to use their points faster, Martini said. Most card issuers give cardholders three to five years to use the rewards points they have accrued, but they might start shortening redemption terms. “This is where the consumer needs to be careful,” and pay attention to any change in terms notices from card issuers, she said.

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The Way Points Are Earned and Redeemed Could Change
woman enjoying view from Mykonos infinite pool

Card issuers also might start tinkering with the way cardholders can earn and redeem rewards points. For example, card issuers are likely to increasingly tie rewards to spending at particular merchants, Martini said. That means you might get more points for shopping at some retailers than others. And card issuers might reduce the number of points they award in areas where they don’t want you to spend.

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Card issuers could also increase the number of points needed to redeem rewards or change the type of rewards cardholders can receive, Martini said. For example, your travel rewards credit card might no longer allow you to redeem points for international travel — only regional travel. “If you are accruing points with a card and you get a disclosure letter in the mail, if you don’t read anything else, find the section about points and see if there will be a change,” she said.

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What Rewards Cardholders Can Do

If your card issuer starts making changes to its rewards program, evaluate whether it’s worth it to stick with that program — especially if you’re paying an annual fee. Credit unions are less likely to issue rewards cards with annual fees, Martini said. They’re also more likely to offer cash back, which might be more appealing if you don’t travel frequently.

Take the time to examine whether the card you have rewards you for the way you spend and whether you can actually use those rewards. If not, “find the card that supports what you want, make a goal and stay committed,” Martini said.

Click through to read more about the best travel credit cards.

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About the Author

Cameron Huddleston

Cameron Huddleston is an award-winning journalist with more than 18 years of experience writing about personal finance. Her work has appeared in Kiplinger’s Personal Finance, Business Insider, Chicago Tribune, Fortune, MSN, USA Today and many more print and online publications. She also is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. U.S. News & World Report named her one of the top personal finance experts to follow on Twitter, and AOL Daily Finance named her one of the top 20 personal finance influencers to follow on Twitter. She has appeared on CNBC, CNN, MSNBC and “Fox & Friends” and has been a guest on ABC News Radio, Wall Street Journal Radio, NPR, WTOP in Washington, D.C., KGO in San Francisco and other personal finance radio shows nationwide. She also has been interviewed and quoted as an expert in The New York Times, Chicago Tribune, Forbes, MarketWatch and more. She has an MA in economic journalism from American University and BA in journalism and Russian studies from Washington & Lee University.

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