Loyal reward card users should tread carefully. Make one misstep, such as a late payment or exceeding the credit limit, and you could lose your ability to redeem points. Even worse, if the credit card issuer decides to close your account for any number of reasons, you could end up losing all of your hard-earned points.
The Credit CARD Act reined in many of the all-too-common (and exploitative) practices employed by credit card companies, but rewards still remain one area that is loosely regulated. Card companies still have plenty of flexibility with the way in which they structure their rewards programs -- and many are using that flexibility to wipe out point balances for cardholders who don't follow the rules. The problem is that those rules are often buried in the fine print of a credit card agreement.
Don't assume all programs are similar and don't forget to use your rewards within the period specified on your credit card contract or you'll lose them. Generally, your best bet is to check on your rewards quarterly. Be sure you are being rewarded as anticipated, get to know your balance and your use options.
And, if you get an an offer in the mail for a rewards card, read the fine print. Some new rewards cards come with annual fees that you'll have to pay in order to take advantage of those cash rebates or other rewards. Even if you pay that annual fee, you could lose your rewards if they expire, you pay late or you don't use your card.
Many consumers lose out on their rewards because they fail to redeem them in time. Synovate, a market research company, estimates that only about a quarter of eligible cardholders redeemed their reward points last year. The market research firm also says based on historical trends, three in every four credit cardholders are expected to either cancel or consolidate their credit cards, especially if they carry an annual fee. If you are planning to cancel a card be sure to see if you have any redeemable rewards points left. Use them before you cancel. Once you cancel those cards you'll likely lose the points.
Here are the rules offered by some of the major credit card programs.
Chase Freedom Program
Chase cuts off your ability to earn rebates or redeem points if your account is in default. Fair enough, but then it's rules go on to say that default can "cause you to forfeit any rebates or points in your Account." If your account is closed for any reason, by Chase or by the account holder, any points or rebates you've earned will be forfeited. Also, if Chase can prove fraud or abuse in the use of points or rewards they will cancel your membership and your rebates or points will again be forfeited. Once your rebates or points are forfeited for any of these reasons, Chase won't reinstate them.
If you redeem your rewards for a gift card, there are additional rules depending upon the gift card you choose. So read the fine print about any gift card you select. You also cannot sell or exchange a gift card.
Chase's rebates expire in 36 months from the month the rebates were first earned. Points expire 60 months from the month in which the points were earned.
Bank of America World Points Rewards Program
In order to earn and redeem points your account must be open and in good enough standing to allow you to make purchases. If your card is suspended for any reason, such as a late payment or frequent overdrafts, you can't use the points unless you regain your privileges. If you voluntarily close the card or if Bank of America closes the card, all unused points are "immediately and irrevocably forfeited."
Bank of America also warns in its fine print, "We reserve the right to disqualify anyone from participation in the Program, refuse to reward or redeem Points, and close your card if, in our sole judgment, you or any other person(s) using the Card, have violated the Program Rules." In a nutshell, Bank of America can pretty much take away your rewards points whenever it sees fit.
Points expire five years from the end of the billing cycle during which the points were earned.
Citibank ThankYou Network
Citibank customers get their rewards through the ThankYou Network, which doesn't appear to be so grateful for your business. Any portion of the program "may be revised or terminated with 30 days prior written notice" and the rewards and point levels required for redemption are "subject to change without notice." If the ThankYou Network is ever terminated, you will have 90 days to redeem your accumulated points.
If your ThankYou member account is closed for any reason, you lose all your points. If your account shows signs of abuse, fraud or suspicious activity, your account can be frozen or closed altogether. If the network finds you conducted fraudulent activity the network even "reserves the right to take any legal action and may have grounds to confiscate any rewards redeemed as a result of such activity." You could even be held liable for monetary losses, as well as litigation costs and damages.
Discover More Card
If your account is closed for any reason or inactive for 18 months, or if you fail to make the minimum payment due by the due date for two consecutive billing periods, you forfeit your cash back bonus. Discover has no expiration date for its rewards.
Capital One No Hassle Rewards Cards
The rewards you earn are earned for the life of your Capital One account. They don't expire, but you can lose them if you close your account or the account is closed by Capital One.
In order to redeem the rewards your account must be in good standing, which means it can't be past due, over the limit, part of a consumer credit counseling program or part of a bankruptcy settlement. The points will also be lost if Capital One finds fraudulent activity or restricts the account for any reason.
Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Improving Your Credit Score.
The next credit card battleground: rewards cards