Vigilance can help you hang onto credit card rewards
When it comes to credit cards, it should not be a surprise that there are black holes that could drain out all those precious reward points.
Many consumers pick their plastic based on the kind of rewards they can receive on a credit card.
“Rewards programs, however, can be highly complex, with detailed, confusing rules about how consumers can actually use their rewards,” according to the Consumer Financial Protection Bureau.
The federal consumer financial watchdog agency notes that some disclosure issues, including rewards programs, continue to be problematic, even after the Credit Card Accountability, Responsibility and Disclosure Act of 2009.
Experts warn that rewards can be lost or taken away for reasons, such as:
•Missing a payment. Say you charged a large amount for holiday shopping one month but then failed to make the monthly payment or didn't make that payment on time. You could lose the rewards that you had built up for that month. Some card issuers have a way to reinstate those rewards, but there may be a costly fee, according to Bill Hardekopf, CEO of LowCards.com in Birmingham, Ala., a website that provides credit card information for consumers.
The reinstatement fee for American Express is $35 for each billing period and each card account for which you reinstate points. American Express also requires that you reinstate points within 24 months of forfeiting them to get the points back.
• Closing your account. Rewards won't transfer with you. So make sure to use the rewards before closing an account. Some card issuers, such as American Express, offer a 30-day window for using credit card rewards after you've closed the account.
If a credit card account is closed following delinquency, the customer may forfeit his or her reward balance.
• Taking an item back. Do not think of rewards as refundable. I used a rewards certificate that I received via a retail card to buy a dress, and then I changed my mind. Whoops, the $25 reward disappeared when I returned that dress.
Gerri Detweiler, director of consumer education at Credit.com, said one of the biggest risks, of course, is that people simply forget about any rewards that they built up on the card. Or they just don't have time to spend those rewards.
“I once accumulated enough points for a trip to Alaska on Alaska Airlines but for a variety of reasons, never ended up using them,” Detweiler said.
“Eventually, I canceled the card and my points went with it,” she said.
Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at email@example.com.