How Rewarding is Your Credit Card's Reward Program?

By Leah Gorham

Credit card reward programs are becoming less rewarding as a new law takes effect restricting the credit card industry's ability to raise interest rates and charge fees. Credit card companies are reducing the amount of programs that offer lucrative rewards such as frequent-flier miles and cash rebates, and now customers often have to pay higher fees to earn these rewards. For example, Discover has eliminated one of three tiers in its cash-back program. Previously, customers received 0.25 percent of the first $1,500 spent, 0.5 percent for the next $1,500, and 1 percent for anything above $3,000. Now they will receive 0.25 percent back for the first $3,000 spent and 1 percent above that.

For a large segment of consumers, the benefits offered under reward programs for certain credit cards are the sole reason why they choose one credit card over another. However, it is important that as consumers we look closely at the terms of these programs and understand the loopholes that credit card companies often use to change the terms and conditions of their rewards programs. In a recent study conducted at CardHub.com, it was revealed that all of the major credit card issuers (American Express, Bank of America, Capital One, Chase, Citibank and Discover) will revoke any reward points earned in a billing cycle during which a consumer’s account is delinquent. Moreover, all of the major credit card issuers reserve the right to change the terms and conditions of their reward programs or even cancel the program at any time, and for any reason.

Although the real value of credit card rewards may be less than expected, there are still positive ways to use rewards. For instance, by using points to make charitable donations, a consumer can make a $50 donation to the nonprofit of their choice for as little as 5,000 points ($50 worth). Just remember, you can't take a tax deduction on these points donated. Another way to avoid these loopholes in the programs is to opt for cash back rewards since once you keep the rewards you earn and credit card companies cannot devalue the rewards in any way after you have earned them.

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