Forgot to pay your credit card bill? You could lose your rewards points
More issuers withholding or taking away rewards for late payments
By Jen A. Miller
Here's another reason to pay your credit card bill on time: If you pay
late, you could lose your rewards points.
Sixty percent of consumers have credit cards that offer rewards,
according to the Federal Reserve Bank of Boston. And why not? Getting free stuff for using a
credit card can be a great perk when using plastic.
However, "credit companies are saying, 'Rewards points if
you're not paying your credit card bill on time? If you're late, maybe you
shouldn't have access to that perk,'" says Scott Gamm, founder of
Threatening with fees or the loss of rewards can also be an incentive to
get customers to pay promptly, says Liz Pulliam Weston, a personal finance
columnist for MSNMoney.com and author of "Your Credit Score, Your Money and What's at Stake." "If you're going to lose your rewards, that
might be what gets you to pay attention when a late fee might not," she says.
This practice isn't anything new, says Richard Bialek, who
led credit card units of GE Money and is the former senior vice president of
consumer credit products at Visa International. He's now owner of Bialek Group,
which consults companies on new ways of accepting credit card payments.
He saw credit card companies wiping away rewards points for
late payments 15 years ago, but not with as many cards as we're seeing now, nor
with the option to pay a fee to reinstate points.
"There's a cost related to rewards programs, and when the
issuers don't see the payments coming in from the cardholder, they'll stop
access to that," he says. "They're looking for every fee. Some of this reminds
me of the airlines and new baggage fees. It's another revenue generator."
|Major card issuers' late payment/reinstatement policies on rewards points
||1 missed payment
||Rewards can only be restored after reinstatement fee is paid.
|Bank of America
||Rewards will be restored once account is current again.
||1 missed payment
||You lose only the rewards you earned in the billing cycle of the missed payment.
||You lose all rewards after 60 days of nonpayment.
||1 missed payment
||Rewards will only be restored after reinstatement fee is paid.
||2 billing cycles
||You lose all rewards after missing two payment cycles.
Want to keep your rewards? Here are some things to consider:
the reinstatement fee if you risk losing sizeable rewards. "If you have
enough for business class trip to Europe, by God, yes, you're going to pay
that $29," says Pulliam Weston. But if your points don't add up to the
fee? Don't bother.
- Set up
automatic payments so your rewards are never at risk,
especially if you just forgot about your credit card bill. Plus, you'll
save yourself a late fee and possibly mucking up your credit score.
Weston also recommends re-evaluating rewards programs every year,
especially since card companies have watered down programs. You can use the
CreditCards.com rewards cards comparison page to figure out what program works best for you to
maximize your point power.
Just make sure to set up those automatic payments.
See related: How to keep track of all those rewards points, Who owns the rewards on a company card?, How to decide when to dump your rewards card for another, Do you lose your miles if you cancel your rewards card?
Published: October 19, 2010
Three most recent Reward programs stories:
- 6 rules for 'card flipping' – While "flipping" cards to take advantage of promotional deals can lead to free travel and other perks, if you don't play the game correctly, you can trash your credit ...
- Buying a car with a credit card often an uphill fight – Using a credit card to buy a car could give you consumer protections and perks. But most dealers hate the fees that go with accepting plastic, so you might have to wheel and deal ...
- Small banks, credit unions keep debit rewards programs alive – Three years after big banks started pulling the plug on debit card rewards programs, many small banks and credit unions are finding surprising success in offering similar rewards to their customers ...