7 ways you can lose credit card rewards points
You worked hard for those points, so don't throw them away
By Allie Johnson | Published: June 12, 2017
You sweat over your spending for months or years to rack up enough rewards to jet off on a trip of a lifetime. But your dreams can be dashed quickly if you commit an infraction that causes your card issuer to yank your rewards.
“They can disappear,” says Ira Rheingold, executive director of the National Association of Consumer Advocates, an association of consumer attorneys.
|HOW YOU CAN LOSE CREDIT CARD REWARDS|
Two of the most common ways to lose rewards are returning an item, in which case you likely will lose the points, miles or cash back earned on that purchase, or by closing a card before using or transferring your points.
However, there are at least seven other ways you can forfeit your points or miles that are spelled out in the fine print of many rewards program agreements. In fact, you could lose your rewards in the following scenarios:
1. You miss a payment.
Most card issuers require a cardholder to keep an account in good standing in order to use and keep rewards. Policies vary, but most issuers take away your points only if your account becomes seriously delinquent.
If that happens, getting your rewards back could cost you. American Express states in its Membership Rewards terms and conditions that a cardholder who fails to pay the amount due on a bill by the closing date of the next billing period forfeits all the rewards earned during the time covered by the unpaid statement. However, a cardholder can get the rewards reinstated through the AmEx online portal by paying the bill plus a $35 fee. Points must be reinstated within a year or they will be forfeited permanently, AmEx warns.
Other issuers may not charge you, but still require you to jump through hoops. For example, the Citi ThankYou rewards program will not allow a late payer to redeem any points until the account is brought current and the cardholder requests point reinstatement online or by phone. And the Chase Ultimate Rewards agreements for various cards state that cardholders 30 days late on payment will be temporarily barred from using points, but rewards will automatically become usable again in the next billing cycle after the account is brought current.
If you completely default on any card, you’ll likely lose your points altogether. For example, the Chase agreements state that if you go 60 days from a payment due date without paying the minimum due, your account may be closed and your points taken away permanently.
Points are a reward for using the card and paying as agreed, says Nessa Feddis, a senior vice president with the American Bankers Association. “It doesn’t make sense to, in effect, give money, in the form of points, to someone who is not paying what he or she owes,” she says.
You let your card languish.
If your credit card issuer cancels your account for inactivity, your points disappear, too. Some issuers might take away your rewards immediately. For example, the BankAmericard Travel Rewards Credit Card terms and conditions state: “You will forfeit points if the account is closed for any reason.”
It doesn’t make sense to, in effect, give money, in the form of points, to someone who is not paying what he or she owes.
|— Nessa Feddis
American Bankers Association
However, many issuers offer a grace period in which you can redeem rewards. The American Express agreement allows a cardholder 90 days to use points after an account is closed for inactivity. Citi will wait 60 days after closing an inactive credit card account to close a ThankYou rewards account. Once the ThankYou account is closed, points go away. And in the case of an account closed just for inactivity, Chase allows a customer 30 days to use remaining points.
However, that leeway didn’t help cardholder Ahmed Bhuiyan, who had moved to Singapore for work and stopped using his Chase Freedom card because it had a foreign transaction fee. He didn’t learn his account had been closed for inactivity in time to retrieve the 373,000 Chase Ultimate Rewards points he had been saving to use for his honeymoon. It was a big loss that still bothers him. “It took a lot of time and effort for me to get those points,” he says.
You run into financial woes.
Some issuers consider financial difficulties a reason to repo your points. For example, Chase Ultimate Rewards card agreements state that the company can take away your points if you file for bankruptcy.
The reality is that by the time most people file for bankruptcy, they already have lost their points or miles by getting far behind on payments, says Ed Boltz, a North Carolina bankruptcy attorney and partner in the Law Offices of John T. Orcutt. However, some consumers do file for bankruptcy while still current on credit card bills, and it makes sense that a lender would want to keep open the option of taking away any remaining points in that situation, he says, if the cards are closed or the balances wiped out in bankruptcy.
First, if you owe, say, $6,000 or $8,000, and the issuer knows they could lose that money, they don’t want you to get the perks earned on that spending too, Boltz says. Second, the issuer might want to protect against a bankruptcy trustee treating rewards as an asset. For example, they don’t want a trustee to say, “‘Oh, you have 60,000 frequent flyer miles, I’ll cash in that for a flight and sell it to the highest bidder,” he says.
You break the rules.
Most issuers warn that they will take points away if you run afoul of program rules, for example, by trying to sell your points, or if you commit fraud.
American Express states that if you try to earn or use points fraudulently, they may take away your points and close your cards. And Wells Fargo states that it can determine at its “sole discretion” whether you have misused the program, as does Capital One.
Some card issuers also have cracked down on “churning” rewards cards, which is signing up for a new card just to get bonuses, then closing those cards and signing up for more.
For example, Chase agreements state that the issuer may take away your points if you “misuse” the program by “repeatedly opening” cards just to generate rewards. The Chase 5/24 rule, which can get you turned down for a credit card if you’ve opened five-plus card accounts with Chase within a two-year period, is an attempt to discourage consumers from opening cards just to take advantage of promotional offers.
5. The clock runs out on
With most major credit card rewards programs, except for airline rewards, points do not expire as long as the card is active. However, consumers should find out upfront if the points in their card program expire, and they should record expiration dates to avoid losing points, says Rosemarie Clancy, vice president of content and marketing for RewardExpert, a service that helps consumers maximize rewards.
“Some rewards have a shelf life,” she says.
For example, the Wells Fargo Rewards Card terms and conditions state that points expire 60 months after being posted to your account. As you use points, the oldest are used first. With the Citi ThankYou rewards program, the rewards on some cards never expire while others expire after three or five years.
Expiration is a big issue, so you need to consistently check your stockpiles.
|— Rosemarie Clancy
Vice president, RewardExpert
If you have a co-branded airline card in which miles get deposited right into your frequent flyer account, you might need some kind of activity on the account every 18 months or so to keep your miles from expiring, depending on the program.
“Expiration is a big issue, so you need to consistently check your stockpiles,” Clancy says.
Most card companies also spell out what happens to points when a cardholder dies, and it varies by issuer.
If notified of a cardholder’s death, Chase will automatically redeem any remaining Ultimate Rewards points as a statement credit if the number of points in the account meets the minimum threshold for redemption. Otherwise, the points are lost, according to the Chase Sapphire Preferred agreement.
And the Citi ThankYou rewards agreement states that you lose your points when you die, with one exception. If the executor of your estate contacts Citi within one year and provides proof of your death, the points can be redeemed for cash rewards.
“First, the points are intended for the benefit of the person who earned them,” she says. Second, it can be costly and complicated to identify and confirm beneficiaries and arrange transfer of points to someone who may not be a customer, she adds.
The issuer cancels the program.
In most agreements, the fine print mentions that the issuer may cancel the rewards program. If that happens, cardholders in many cases will have a few months to redeem rewards.
For example, if the program is ever canceled, Chase will allow Ultimate Rewards members 30 days to use their points. And the Citi ThankYou rewards program will allow consumers 90 days to use points. However, the Capital One Venture rewards agreement simply states that the issuer can terminate the program at any time without notice.
You can minimize the chances of losing your rewards for any reason by keeping your account in good standing, monitoring it closely and following the rules.
If you have an airline co-branded card, and your points go directly into your frequent flyer account, the points become subject to the terms and conditions of that account, not those of your credit card issuer. The same applies if your card issuer allows you to transfer points into a frequent flyer or hotel loyalty account, and you make that move.
One way to avoid having points sit around for too long is to consider switching to a cash back program, Rheingold says.
However, if you want to stick with points and miles, it’s best to rack up rewards with a specific goal in mind and use your points as quickly as you can, says Bhuiyan, the consumer who lost his big stash of points.
“One lesson I learned from all of this is not to hoard points,” he says.
- 6 habits of successful card reward experts – Taking your rewards game to "wow" levels requires a bit of ingenuity and skill ...
- Is it worth keeping the Chase Sapphire Reserve for a 2nd year? – The one year anniversary has arrived for Chase's blockbuster premium card; we break down whether it's worth keeping once you've used the big bonus ...
- Paying for a rental car with debit card: 9 obstacles – Want to rent a car using a debit card? Expect extra hassles ...