The finance world — like almost everything else — went through a major upheaval in early 2020. Credit card rewards were not immune the chaos caused by the stay-at-home orders and business closures. If you use a rewards based credit card, whether it’s cash back, points, or travel miles, you might be affected. Here are some changed you should be on the lookout for.
It’s Not All Bad News
Let’s start with the good news. If you happen to have a new credit card with an attractive introductory rewards offer, you might be struggling to meet the spending minimums. Some credit card companies have offered extensions to those reward windows. It’s important to do your homework, though. Some companies increased the bonus window automatically, while others require that you specifically request it.
If you own a travel rewards card, you’re probably feeling like it’s a waste right now. With travel restrictions still in place for the foreseeable future, your miles/points might expire. Even if they don’t, it could be another year or two before you feel comfortable putting your family on a plane. Meanwhile your points are just sitting there, not helping you.
Travel Points Can Convert
Another potential positive of the current situation is that some companies are switching away from travel rewards. For obvious reasons, really. Companies like American Express and Chase are offering bonus rewards for using their cards on simpler things like groceries, streaming services, or wireless bills. Receiving a discount in the form of cash back on things you’re actually buying right now makes sense. Especially since few of us are booking hotel rooms or airline tickets right now — items that typically offered large rewards.
They Want You To Keep Spending
Whether you’re feeling the financial crunch or not, credit card companies want you to keep spending. To that end, they are adjusting their rewards programs to entice you. This is especially true if you have a lucrative rewards card with an expensive annual fee. Why would you continue to pay $250+ per year for a card that you can’t squeeze rewards out of anymore?
“These credit card issuers are trying to figure out ways to incentivize people to continue spending…so they can feel that the credit card is a justified purchase at a premium of [about] $500 a year,” said Brett Holzhauer, travel rewards expert from ValuePenguin.
Some Changes Might Stick…
No one really knows how long the current situation will last. Plenty of experts are already throwing around the term “new normal” to describe how society will function post-pandemic. By that, they mean that some of the current changes will probably stick around for good. The same is true of credit card rewards programs.
If your rewards pivot from travel miles to cashback on groceries or extra points by paying for streaming services, those option will probably remain. That being said, you can be sure that credit cards will try to claw back some of the new perks when spending eventually returns to normal.
…But Some Definitely Won’t
Steven Dashiell, a credit card expert at Finder.com, is worried about what happens when things revert back.
“The new reward categories feel a bit like letting the genie out of the bottle. It’s a fundamental change to the card’s perks and I have to wonder if cardholders are going to get a little too used to those rewards. What’s going to happen when those rewards go away?” he ponders. He expects that the new bonuses will be slowly phased out when the economy begins to recover.
The Shift Was Already Happening
Long before the world turned upside down, some credit cards were already moving away from travel miles or cash back. A handful of cards were offering “lifestyle perks” as rewards. Those things included delivery discounts for services like Doordash or rideshare credits for Lyft or Uber. When you add in extra rewards for using your card to pay for things like Disney+ or Spotify, you’ve suddenly created a credit card perfectly marketed to many millenials.
What About Travel Rewards?
International travel is off the itinerary for many people right now. Maybe even for the next year or two. So those travel rewards points suddenly seem a lot less useful.
“This is going to weed out the hardcore travelers from the people who take one or two trips a year,” Holzhauer said. “This is a good time to look at your strategy and say, ‘is this card really giving me the best value’?”
Now is the perfect time to ask yourself that question. Are you getting travel rewards that you’ll never use? Will they expire before things get back to normal? There’s not much point in collecting rewards that will never be redeemed. Be honest about your lifestyle. If necessary, switch to a card that makes more sense for your lifestyle. Accumulating those air miles seems like a nice dream, but cashback on your groceries might make more financial sense right now.
Big Sign-Up Bonuses May Be Coming (With a Catch)
As credit cards try to increase consumer spending, expect some lucrative sign-up bonuses to pop up. For responsible consumers, it could be a great opportunity to score major rewards.
“Consumers need to know that these bonuses are going to be big and they’re going to come in swinging,” said Holzhauer.
However, there’s the issue of inflation. Simply put, reward points and miles are worth… whatever the company decides. If they dump a bunch of cheap rewards into the market in an effort to increase spending and attract new customers, each individual reward could be worth less. Companies can usually change the values of their rewards at any time. For example, that airline ticket to Europe used to be worth 100,000 points. With rapid inflation, the same reward could suddenly cost 250,000 points. That doesn’t help you at all.
The Last Word
Credit card rewards can be a nice incentive, but they have their limitations. If you carry a balance on your card from month to month, you’re probably paying more in interest than your rewards are even worth. You should also know whether your rewards have an expiration date or not. If they do, be sure to use them before they disappaer.
Since rewards value can fluctuate over time (or change on a moment’s notice), it’s always a good idea to use your rewards frequently. Remember that saving $50 a month on groceries due to cashback is still the same as earning a $600 airline ticket once a year.