Credit Card Companies Love Rewards

When Gartner, the IT research specialist, published a report last year entitled Innovation Map for Value-Added Services in Card Processing, it identified credit card reward programs as a key enabler of growth for card issuers. You can see why.

Credit card companies are now subject to much more stringent regulation, and that has squeezed one of their principal revenue streams–penalties for late payments and exceeding limits. What’s needed to replace that income is a way to get good, creditworthy consumers to pay for their credit card use, something they often used to get free.

And a credit card reward program that is perceived to deliver real value is probably the easiest way for a card issuer to persuade a cardholder to pay an annual fee.

Credit Card Rewards: How to Protect Them

Yesterday’s New York Times carried a feature warning that some credit card companies have sneaky ways of reducing the value of rewards. The piece made some good points (forgive the pun), but is it really all that surprising that, for instance, Bank of America and Citi can wipe out rewards points that are more than five years old? Five years seems a long time, especially with a card that racks up points quickly.

Credit Card Terms and Rewards

As the Times points out, you can also lose reward points if you breach certain of your credit card terms. It gives Discover as an example of an issuer that can erase all points if a card is inactive for 18 months.

And many credit card companies can penalize points if you’re late making monthly payments. For instance, Bank of America currently holds your points hostage if you’re more than 60-days late, although you should be able to redeem them again as soon as you’re current. Others are less generous, and it’s possible with some to permanently lose every single reward point for being just 60-days overdue.

Generous Credit Card Users

If you’re sitting on a pile of points that you have no plans for, you have various options that could put a smile on other people’s faces.

To start with, it’s worth seeing whether you can transfer points to friends or family who have similar accounts. Some rewards programs allow you to do this for a minimal fee or even for free.

And, of course, many credit card companies have special schemes that allow you to donate points to charities. Some companies have large databases of organizations to which donations can be made, while others offer a narrower selection. Your issuer’s website should be able to help.

Published 04/08/10 (Modified 03/20/14)