Credit cards look to zap rewards

Another fee is coming in the new year for airline and hotel customers – this time from your credit card company.

The message: Pay your bill on time or forfeit the miles or points you thought you earned for making purchases on your card during that month.

American Express Co. is sending notices to customers who hold its co-branded cards with Delta Air Lines, JetBlue, Hilton Hotels and Starwood Hotels, saying that beginning in January rewards won’t be transferred to loyalty accounts with those partners if you are late paying your bill.

You’ll be hit with a $29 reinstatement fee if you want the rewards back. That’s on top of the regular late-payment fee: $19 or $38, depending on your balance.

The policy doesn’t just affect the habitual late payer, it impacts everyone, said John Ulzheimer, president of educational services for Credit.com.

“I think over the course of time, people miss a payment at least once because of unforeseen circumstances like something getting lost in the mail or a long vacation taking your focus off making your payments,” he said.

Other card issuers, like Citigroup Inc. and JP Morgan Chase & Co., also have co-branded credit cards with airlines and hotels.

Citi is paired with American Airlines. Chase is paired with United Airlines and Marriott International Inc.

Citi spokesman Mark Rodgers says points earned on the company’s Citi cards that offer rewards through the company’s own rewards program may not be available for redemption if a card holder pays late one month, and in some cases a fee for reinstatement may apply.

Rodgers says Citi is not considering reinstatement fees for its co-branded cards with American Airlines and Hilton.

JP Morgan Chase spokeswoman Tanya Madison said that if an account is past due for the co-branded United card, a customer will not earn miles until the account is paid.

“While we do not go back and confiscate miles, we will stop awarding miles on spending going forward until the account’s paid in full,” Madison said.

Consumer advocates aren’t surprised by American Express’ move considering tough new rules for credit card companies scheduled to go into effect in February.

Under the new law, lenders won’t be able to increase rates on existing balances unless a person is more than 60 days behind on a payment.

“Essentially if you can’t charge one fee, you create a new fee,” Ulzheimer said.

American Express spokeswoman Desiree Fish said her company currently transfers Delta SkyMiles to its cardholders’ loyalty accounts for eligible purchases even if they are late paying their bill.

She said that in addition to changing the policy for co-branded cards to be in line with its other cards, American Express also wants to “incentivize good behavior, to say you should pay on time, and if you don’t there are penalties.”

Delta said in a statement that the changes to American Express’ terms and conditions are consistent with changes across the credit card industry and also include new benefits for Delta customers, including the ability to earn unlimited SkyMiles for purchases on the credit card each year.