Credit card reward points could disappear without notice

Don't sit on points too long; issuers can change, drop programs at will

By Jeremy M. Simon

Reward credit cards have become a  popular way for card issuers to attract customers and encourage credit card spending.  But consumers who rack up a huge number of reward points and then sit on them, waiting to redeem the points for something they really want, should be careful: Credit card issuers have no legal responsibility to keep the reward programs they advertise.

Even though reward credit card users could simply lose their points without warning, good customer service often wins out.  Some credit card companies will update cardholders when they eliminate reward programs or change qualifying terms, reports the American Financial Services Association.

Rules for rewards murky
The American Financial Services Association says that the Truth in Lending Act forces issuers to let customers know when they make changes to interest rates or grace periods for their credit cards, but the requirement does not specifically extend to changes to credit card reward programs.  Instead, the Consumer Bankers Association explains, the only rules that could govern reward programs are state contract laws. 

Luckily for consumers, since the credit card industry is highly competitive, it is rare for issuers to simply abandon reward programs out of the blue.  However, if a credit card does get canceled, issuers usually cancel unused rewards, reports Gail Hillebrand, senior attorney with Consumers Union.

She recommends that consumers who are accumulating reward points should have credit cards in their own names and based on their own credit histories.  A husband and wife may want separate credit card accounts.  Such an approach is helpful both in the extreme case where the primary cardholder dies and the issuer cancels the unclaimed points, as well as due to the fact that many credit cards have a maximum amount of points that can be earned on one card each year.  If a couple has two individual credit card accounts, they can double the amount of points earned annually.

Complain, but don't expect much
Should the credit card issuer try to canncel unused rewards points, experts recommend that the consumer make a complaint, since an issuer looking to keep a good customer may be willing to transfer any unredeemed points to a new credit card.  While this is a good business practice, Hillenbrand says that consumers probably cannot force an issuer to transfer points to a fresh credit card. 

Additionally, a consumer who has points taken away may choose to the appropriate regulatory agency. Under America's multiheaded banking regulations, you need to know which regulator to complain to. Hillenbrand encourages this practice, since regulators who continually hear similar objections from consumers may begin questioning the banks about their policies.  If consumers remain quiet, regulators will only hear what banks report to them.

For those reward credit card holders or cash back credit card users who are not looking to cash in for a large reward, it might make sense to redeem points regularly for smaller rewards or cash back sums -- just in case.  

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Updated: May 10, 2008

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