BACK

Dean Mitchell / GettyImages

Rewards

The future of credit card rewards

Experts predict what rewards programs will look like in the coming year

Summary

Credit card rewards will likely shift due to the pandemic, but cash back will remain king.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Never underestimate the power of credit card rewards – you can use them to travel, buy merchandise or gift cards, and even get cash back for your everyday purchases.

Card issuers also change their rewards programs and often offer cash bonuses for spending a certain amount within a period of time.

If you’re wondering what credit card rewards will look like in 2021 you’ve come to the right place. We asked the experts what they anticipate will happen with credit card rewards.

See related: How to get the most from rewards credit card points

Redemption options could expand

“I think we’re going to see credit card rewards points continue to expand regarding what we can spend them on and redeem them for,” said Katelyn Magnuson, founder of The Freelance CFO, an organization designed to help millennials master their money knowledge and grow their financial freedom.

For example, Capital One partnered with Amazon to allow its cardholders use their rewards points to pay on Amazon.

Magnuson also thinks we’ll see other symbiotic pairings and avenues for redemption options.

“Especially with travel-focused rewards cards, having alternative redemption options can encourage consumers to still spend their points and rewards even during the COVID-19 pandemic,” she added.

Credit card rewards have been changing dramatically for some time now as individuals have caught on to how to leverage their day-to-day dollars for big rewards, said Aaron Velky, CEO and co-founder of the financial website Ortus Academy.

In the coming year, he predicts card issuers will start to offer more flexible uses of points that favor practicality – in the form of rebates, more partners and statement credits.

Cash back cards might dominate

Leif Kristjansen, founder of the financial website Five Year Fire Escape, noted that travel rewards have been competing with cash back rewards for a long time – cash back is easy and guaranteed to be used, whereas travel offers better payback.

Many consumers are tired of travel rewards because they are often difficult to redeem, Kristjansen said, and now they’re stranded due to the pandemic.

“Cash back, on the other hand, is still fine during a pandemic and better during a recession,” Kristjansen said.

With travel likely to be affected for years to come, he expects cardholders to jump ship to cash back cards once they can find ways to use up their current miles.

Better benefits for everyday purchases

Rob Bacharach, certified financial planner and founder of Carter Bacharach Financial Group, thinks credit card companies will begin to offer greater benefits for more everyday purchases.

Right now, many companies offer 2X to 3X points on items such as gas or dining, but Bacharach thinks we’ll see a shift to a higher return on points for a wider spread of purchases.

He also said there will be a shift toward grocery rewards versus dining out because credit card companies understand for the time being people will be spending a lot more money on groceries. They want to provide extra benefits wherever they believe consumers will be spending the most amount of money.

See related: Cash back vs. points – Which is better?

Travel cards could face strong headwinds

Camilo Maldonado, co-founder of the website The Finance Twins, noted that the pandemic has all but shut down the travel and hospitality industry and has pushed unemployment to record levels.

These changes have resulted in credit card companies having to make major changes to their rewards programs in order to entice their existing customers from leaving and also luring new, attractive customers.

Credit card rewards mainly fall under two camps: cash back or travel rewards.

The major cash back cards haven’t seen many changes since they tend to have lower fees and the rewards categories haven’t been affected greatly, Maldonado said.

However, travel cards are facing strong headwinds because domestic and international travel have both been decimated.

For example, he said, cards like the Chase Sapphire Reserve and The Platinum Card® from American Express are tailored to the business traveler, which means that perks such as entering exclusive lounges are pretty much useless now.

But, he said, credit card companies are responding by offering temporary benefits like statement credits, credit for spending on streaming services, bonuses in new spending categories and freezing point expirations.

Fees might be decreased or waived

“If consumers can’t use or transfer their points, they likely won’t want a rewards credit card that comes with hefty annual fees,” said Howard Dvorkin, CPA and chairman of Debt.com.

Many card issuers are already delaying an increase in annual fees or waiving them altogether – if a cardholder asks, Dvorkin said.

Credit cards are like stocks, Dvorkin said – you should buy low and sell high, and during this pandemic, that means using travel cards.

Most card issuers and cardholders are panicking and beefing up their travel rewards even as cardholders are fleeing to cards offering other types of rewards, Dvorkin said.

“I smiled when the Los Angeles Times reported back in April that some carriers are changing their loyalty programs,” Dvorkin said.

At the time, Dvorkin explained, they were tinkering with their typical complicated rules involving “elite status.”

Those rules usually make you jump through hoops to unlock the most lucrative perks on airline cards – while still allowing the cards to tout big rewards in big headlines, he added.

“Their plummeting bottom lines have forced them to simplify, and I only hope that continues long after this pandemic ends,” Dvorkin said.

See related: When is a credit card annual fee worth it?

Maximize your rewards

Given the expected changes in credit card rewards, it’s important that you know how to use whatever points and cash back you intend to earn.

Perhaps the most important thing is to get a card that provides the type of bonuses you will benefit from most and gives you rewards on your most common purchases.

Compare different cards’ offers and determine which suits your lifestyle the best, then try to put most of your purchases on that card.

In addition, stay abreast of the latest news concerning credit card rewards so you know what’s available and always keep track of when your rewards expire.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Rewards

Wyndham Rewards guide

With a range of budget accommodations and hotels located all over the world, Wyndham provides great options for value-seekers.

See more stories
Credit Card Rate Report Updated: November 25th, 2020
Business
13.91%
Airline
15.50%
Cash Back
15.85%
Reward
15.75%
Student
16.12%

Questions or comments?

Contact us

Editorial corrections policies

Learn more