Credit card reward programs are very popular with consumers. In fact, according to the Consumer Financial Protection Bureau (CFPB), cardholders earned more than $40 billion in rewards in 2022, which represented an impressive increase of 50% from 2019 levels.
Satisfaction levels among reward card users is strong as well. According to a Pymnts.com survey, 71% of respondents were very or extremely satisfied with the rewards they earn using their primary rewards credit card. On a personal note, I love my card_name which earns me up to 2% on almost all my purchases. I have used it faithfully for decades and earned thousands of dollars in cash back over the years (which I would not have earned if I had used a debit card or cash). Citi is a CardRatings advertiser.
Despite the fact that there are millions of satisfied cardholders, some have had less than stellar experiences and have submitted complaints. Some complaints were recently published in a report by the CFPB and the Department of Transportation (DOT). A major focus of the report seems to be on cards that offer travel rewards, such as free air miles.
After reviewing the findings of the report as summarized by my colleague Herb Weisbaum, also known as the ConsumerMan, I decided it would be helpful to directly address these consumer concerns. My goal here is not to trivialize the findings of the CFPB (though I think some of the findings are off-base and others stem from a lack of consumer awareness), but rather to educate reward cardholders regarding best practices. In short, I hope that this article will offer actionable steps to help consumers avoid and/or mitigate the issues brought up in the report.
What are the major complaints about rewards credit cards?
The major consumer complaints that the CFPB received seemed to be centered around four areas:
- Imposing unexpected conditions to receive promotional offers: Cardholders complain that the requirements to qualify for credit card welcome bonuses can be confusing and are often buried in the fine print.
- Devaluing rewards: Card issuers and their partners, most notably travel reward cards, are accused of commonly reducing the value of reward points that have already been earned by the cardholder. This is done by increasing the number of points or miles needed to redeem them for certain rewards, such as a round-trip airline ticket.
- Redemption problems: Customer service issues and/or technical glitches can make it challenging to redeem rewards involving third-party merchants, such as a major airline. Cardholders complain that card companies often refer them to partners when they complain and fail to reinstate rewards if there are issues.
- Revoking previously earned rewards: Points, miles, and cash-back rewards often disappear with no recourse when consumers close accounts. Moreover, a minority of cardholders complain that their card issuer revokes hard-earned rewards on open and active accounts through hidden expiration policies.
These findings seem to suggest that reward cards are scamming consumers and you may be wondering if these programs actually offer any real value. According to credit card expert Jason Steele, there’s no doubt that these programs can offer substantial value. However, while Steele is a big proponent, he admits that “these programs are largely unregulated and many consumers have legitimate issues with restrictive terms being hidden in fine print, as well as unannounced devaluations of their points and miles.”
BONUS TIP!
Considering applying for a reward card? Be sure to review the card’s terms and conditions very carefully before applying. These terms should be disclosed before you apply. If you already have a rewards card and can’t find your original terms, it’s a good idea to call your issuer to get a copy. You might also be able to find your card’s terms listed and searchable on a free database provided by the CFPB.
Are promotional or sign-up credit card bonus offers worth it?
The card industry is very competitive and card companies have a reputation for offering generous limited, one-time sign-up bonuses (also known as welcome offers) in order to entice consumers to apply. In addition to aggressive offers of air miles which can be redeemed for free airline tickets, there are also cash bonuses offered by many cash back credit cards. These offers can reward you with hundreds of dollars over and above the normal cash rewards you earn on purchases.
As you might expect, these offers do come with a few strings attached. Most offers require you to spend so much, typically $500-$5,000, within a certain timeframe, usually three to six months. The card_name, for example, allows cardholders to earn $200 cash back after spending $1,500 on purchases within the first six months of account opening.
The bottom-line question seems to be how can you insure that you get what you were promised. Steele maintains that complaints of these offers being bait and switch aren’t “a very valid criticism.” He adds that “every offer is very explicit in that it has a minimum spending amount that must be met within a specified time frame in order to receive this bonus.” Finally, he notes that he personally has taken advantage of dozens of these offers over the years and has never had any problems.
Here are some best practices to follow to ensure you receive a credit card welcome bonus:
- Make a note of your account opening date, the amount of spending needed to earn the bonus, and the deadline to reach the spending requirement.
- Carefully comply with the terms of the bonus/rewards offered by your card.
According to Steele, following these two simple steps can help ensure that you will always receive the promised bonus. Beverly Harzog, credit expert and podcast host of “Your Personal Economy,” adds that an issuer needs to “make it clear how you earn the promo offer, which usually includes meeting a spending requirement within a certain timeframe. If you feel that your issuer has misled you, contact the CFPB and report it.”
BONUS TIP!
Sign-up bonus offers can be a great way to get a free airline ticket. You can typically get a free roundtrip flight for 20,000+ miles (this varies based on the airline and the time of year that you travel). Many airline reward card bonus offers give you enough miles for at least one free ticket if you meet the terms of the promotional offer.
➤ LEARN MORE:Guide to credit card rewards: Points, miles, vs. cash back
What can you do if your credit card company reduces the value of your rewards?
Another complaint as noted above is that card issuers and their partners commonly reduce the value of rewards already earned by increasing the number of points or miles needed to redeem them for travel or other benefits. Steele does concur that such devaluations happen. He notes that every few weeks, there is an airline or hotel card program that implements an unannounced devaluation.
Many programs have “shifted from offering award charts to so-called dynamic awards, which have no expectation of a fixed value.” He states that by doing so, a card company may claim there was never a devaluation as there was no published price to begin with.
Harzog opines that when you agree to become a cardholder, there’s no guarantee that the issuer will not change the rewards program (this should be disclosed in the fine print of every card application). She notes that “this can catch consumers by surprise. There really should be more transparency about that.”
Following these steps can help minimize the impact of a devaluation:
- Don’t hoard or bank rewards. Redeem your points as soon as you can and do so often.
- Harzog suggests setting a goal, such as earning enough rewards to go to Italy, and cash in your rewards as soon as you have enough points or miles to complete the trip.
- Read everything sent to you by an issuer so you know when changes are coming. Issuers are required to notify you of changes in writing.
In fairness to card issuers, it’s not all “doom and gloom” all the time. Occasionally, for example, card issuers do the opposite of devaluation by lowering the points or miles needed for redemption.
BONUS TIP!
If you have a cash-back credit card and are redeeming your rewards for cash back, the value doesn’t fluctuate. If you’re worried about fluctuating rewards, a cash-back rewards card may be a good fit for you.
➤ LEARN MORE:Is cash back better than points? How to value your credit card rewards
How to avoid technical glitches and having your credit card rewards revoked
Other common complaints as noted above deal with technical glitches and issuers revoking rewards, particularly when closing out an account.
Harzog offers the following advice if you experience a glitch:
“I’ve experienced technical glitches while redeeming rewards, so I know this does happen. Sometimes, it’s a technical issue with your service provider. I always wait a few hours and try again. But if you continue to have problems, call customer service and request assistance. You have a right to use your rewards so take steps to fix the situation.”
Regarding revoking rebates that are already earned, Steele maintains that “this isn’t a very big issue as cardholders can learn these policies in advance, and are given the opportunity to redeem their rewards before closing their accounts.” He admits, though, that such policies could be better disclosed.
Harzog offers the following related tips:
- Issuers have the right to close your account. Inactivity can lead to account closure. You can limit this risk by using your rewards card regularly.
- Your account could also be closed if you run up your balance or make too many late payments. The issuer could see these situations as red flags. So, they take action to limit their exposure to risk.
- You can protect yourself by paying bills on time, keeping a low credit utilization ratio and using the card at least a few times a month.
Closing thoughts
While there are certainly legitimate complaints when it comes to card reward programs, there are millions of satisfied cardholders who have used these cards religiously for years and rarely if ever complain. The key to avoid dissatisfaction is being a proactive and informed consumer.
Steele sums it up well:
“I disagree with those who find rewards programs to be a scam. Consumers, however, should always be vigilant and safeguard the value of their rewards. Devaluations are the largest problem, and the best defense is to earn and burn your rewards in a short period of time, and not to save large amounts [of rewards] for future use.”
Harzog echoes this sentiment by reminding us all that card companies are in the business of making money. On a positive note, she adds that “if you know how the rewards program works and use your card(s) responsibly, you can really financially benefit from rewards credit cards.”
