WASHINGTON – Credit card rewards programs are suddenly less rewarding.
Months before a new law takes effect restricting the credit card industry’s ability to raise interest rates and charge fees, card issuers are scaling back programs that offer lucrative rewards such as frequent flier miles and cash rebates. Now many customers have to pay additional fees or earn more points to redeem free plane tickets or claim cash-back perks.
“Consumers should understand that rewards programs are unstable right now, and a lot of the best programs are changing. And almost without exception they are changing to the benefit of the bank and the disadvantage of the cardholders,” said Joe Ridout, a spokesman for Consumer Action.
The changes follow warnings from bank executives that the new law, which takes effect in February, will limit their ability to set interest rates and fees based on each borrower’s risk. That, in turn, would make lending money more expensive, forcing them to withhold credit, charge new customers higher rates and increase annual fees, the executives have argued. Now they say scaling back rewards programs could be another consequence as they try to make up for the losses they expect to incur.
“The days of the free-flowing rewards and 5 percent rebates where the customer has the pick of the litter and 20 different offers in the mailbox are over,” said Curtis Arnold, founder of Web site CardRatings.com.
Although American Express scaled back some rewards programs, it added perks to others. For instance, cardholders can get double miles for gas and grocery purchases until March 31.