Credit Card Issuers May Reclaim Reward Points

Reward credit cards have become an extremely popular way for card issuers to both attract customers and encourage credit card spending. But consumers who rack up a huge number of reward points and then sit on them, waiting to redeem the points for something they really want, should be careful. The reason for this, according to experts, is because credit card issuers have no legal responsibility to keep the reward programs they advertise.

Even though reward credit card users could simply lose their points without warning, good customer service often wins out. Some credit card companies will update cardholders when they eliminate reward programs or change qualifying terms, reports the American Financial Services Association, although the association notes that it is unaware of any federal law that requires such action on the part of issuers.

The American Financial Services Association says that the Truth in Lending Act forces issuers to let customers know when they make changes to interest rates or grace periods for their credit cards, but the requirement does not specifically extend to changes to credit card reward programs. Instead, the Consumer Bankers Association explains, the only rules that could govern reward programs are state contract laws. Still, the majority of credit card contracts indicate that the card issuer can alter rates and terms at will.

Luckily for consumers, since the credit card industry is highly competitive, it is rare for issuers to simply abandon reward programs out of the blue. However, if a credit card does get canceled, issuers usually reclaim any unused rewards, reports Gail Hillenbrand, senior attorney with Consumers Union.

She recommends that consumers who are accumulating reward points should have credit cards in their own names and based on their own credit histories. A husband and wife may want separate credit card accounts. Such an approach is helpful both in the extreme case where the primary cardholder dies and the issuer cancels the unclaimed points, as well as due to the fact that many credit cards have a maximum amount of points that can be earned on one card each year. If a couple has two individual credit card accounts, they can double the amount of points earned annually.

Should the credit card issuer try to reclaim unused rewards points, experts recommend that the consumer make a complaint, since an issuer looking to keep a good customer may be willing to transfer any unredeemed points to a new credit card. While this is a good business practice, Hillenbrand says that consumers probably cannot force an issuer to transfer points to a fresh credit card.

Additionally, a consumer who has points taken away may choose to complain to the Office of the Comptroller of the Currency, which regulates most credit card companies. Hillenbrand encourages this practice, since regulators who continually hear similar objections from consumers may begin questioning the banks about their policies. If consumers remain quiet, regulators will only hear what banks report to them.

For those reward credit card holders who are not looking to cash in for a large reward or for cash back credit card users, it might make sense to redeem points regularly for smaller rewards or cash back sums -- just in case the issuer decides to cancel their card.

Published: 3/15/2007

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