I'm facing default: Are my airline miles at risk?
By Tony Mecia | Published: August 11, 2015
Dear Cashing In,
Will I lose my earned American Airlines AAdvantage miles if I default on the card? Can I transfer miles before default? -- Sandy
I'm sorry to hear of your troubles.
Failing to pay your credit card bill is a serious issue. At some point in our lives, most of us have probably missed a due date on a bill and paid late. That's not good for your credit, and you wind up paying high fees and interest rates, but you can recover from that.
Here, I'm assuming that you're talking about something more serious, such as repeatedly failing to pay the minimum amount due, or perhaps even walking away from your credit card debt. That can devastate your credit score. It could cause you to lose all remaining credit cards you have and make it difficult to apply for all forms of credit in the future, including car loans, credit cards and mortgages.
If that's what you're facing, you might consider finding a reputable credit counselor who can help guide you through some tough decisions -- the sooner the better.
If you're in serious financial distress, discussing the fate of frequent flier miles might seem petty. But if you have a lot of them, there might be substantial potential value there.
Card issuers can cancel your card for almost any reason. Generally, if you use the card regularly and pay on time, they won't cancel it. But if you skip payments, file for bankruptcy protection or even don't use the card, they are more likely to cancel it.
If they cancel it, do you keep the reward points associated with the card? It depends on the kind of card you have.
For reward points that are kept and administered by the bank issuing the card -- such as Chase Ultimate Reward points or American Express Membership Reward points -- those points disappear when you cease to have an open credit card account with that bank.
However, in your case, Sandy, since the card in question simply transfers the miles into a separate frequent flier account run by American Airlines, those miles are not at risk. There is no provision in the program's terms and conditions to rescind miles from your frequent flier account if you default on a credit card or if it is otherwise canceled. You would probably lose any miles you hoped to gain by using the card in the last billing cycle before it was canceled, but once the card company gives the mileage information to American -- which happens every month -- the miles are safe.
"An AAdvantage account is not dependent on a Citi AAdvantage card account," American spokeswoman Laura Nedbal told me. "If somebody's Citi AAdvantage is closed, we wouldn't close their AAdvantage account."
Of course, you still have to comply with American's terms on its frequent flier accounts, such has having activity in the account every 18 months.
From your question, it is also worth noting that you cannot "transfer" miles from a frequent flier program into any other account. You can redeem the miles for a plane ticket, or in some cases hotel stays, car rentals, gift cards or magazine and newspaper subscriptions. But you are limited to the redemption options of that frequent flier program.
With the financial difficulties you are facing, being able to hang onto your American miles might come as little comfort. But maybe it's a bright spot in an otherwise tough situation.
Good luck to you, Sandy.
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Are airline cards worth the annual fee? – Airline cards come with big sign-on bonuses, but after that's used it's difficult to amass a significant number of points. However, there are other perks that make the annual fee worthwhile ...
- How does Priority Pass airline lounge access work? – With it, 1,000 airport lounges in 130 countries open their doors to you ...
- Maximizing card rewards after you've earned the sign-up bonus – So, you've signed up for a bunch of rewards cards, now what? Even if you've already earned the sign-on bonus, there are still some strategies to getting every point available ...