How Your Credit Card Rewards Might Change Going Forward

The financial landscape, much like many other sectors, experienced significant disruption in early 2020. Credit card rewards were not spared from the upheaval brought about by the stay-at-home mandates and business shutdowns. If you utilize a rewards-based credit card, whether it offers cash back, points, or travel miles, you may have been impacted. Here are some alterations you should remain vigilant about.

Now, onto the silver lining. If you’ve recently acquired a credit card with an enticing introductory rewards offer, meeting the spending minimums might be proving challenging. Some credit card issuers have extended these reward windows, providing a bit of relief. However, it’s crucial to conduct thorough research. While some companies have automatically extended the bonus period, others may require a specific request from you.

For those in possession of a travel rewards card, the current situation might feel like a missed opportunity. With ongoing travel restrictions, your accumulated miles or points could be at risk of expiration. Even if they manage to survive, it might be another year or more until you feel comfortable embarking on a family trip. In the meantime, your points remain idle, offering no immediate benefit.

Amidst the challenges, there’s a silver lining emerging. Some companies are pivoting away from travel rewards, which is understandable given the current circumstances. Giants like American Express and Chase are now offering bonus rewards for everyday expenses such as groceries, streaming services, or wireless bills. It’s a logical move, considering that most of us are prioritizing these expenditures over travel expenses at the moment. So, receiving cash back or discounts on essential purchases aligns well with current consumer needs.

Credit card companies are adapting their rewards programs to encourage continued spending, particularly for those holding high-end cards with hefty annual fees. With annual fees often exceeding $250, consumers are less likely to justify the expense if they’re not reaping significant rewards in return. Brett Holzhauer, a travel rewards expert from ValuePenguin, notes that issuers are striving to incentivize spending to maintain the perceived value of these premium cards.

The uncertainty surrounding the current situation has led experts to speculate about a “new normal” that could persist even after the pandemic ends. This includes changes to credit card rewards programs, such as a shift from travel miles to cashback on groceries or bonus points for streaming services. While these adjustments may become permanent features, credit card companies will likely seek to recalibrate rewards once spending habits return to pre-pandemic levels.

Steven Dashiell, a credit card expert at Finder.com, expresses concern about the eventual return to previous reward structures.

“The introduction of new reward categories feels like a significant shift in card perks. There’s a risk that cardholders might become accustomed to these rewards. What happens when they’re no longer available?” he wonders. Dashiell anticipates a gradual phasing out of these new bonuses as the economy rebounds.

Even before the recent upheavals, certain credit cards were shifting away from traditional rewards like travel miles or cash back. Instead, they began offering “lifestyle perks” as incentives. These perks included delivery discounts for services like Doordash or rideshare credits for Lyft or Uber. By adding extra rewards for payments on platforms like Disney+ or Spotify, these cards became tailored perfectly to the preferences of many millennials.

With international travel off the table for many, travel rewards points have lost their appeal. Brett Holzhauer suggests that this shift will distinguish between frequent travelers and occasional vacationers. It’s a good time to reassess your credit card strategy. Are you accruing rewards you won’t use? Will they expire before travel resumes? It’s pointless to collect rewards that won’t be redeemed. Assess your lifestyle honestly and consider switching to a card with benefits better suited to your current needs. While the allure of air miles is appealing, cashback on groceries might be more practical at the moment.

As credit card companies aim to boost consumer spending, anticipate lucrative sign-up bonuses emerging. For responsible users, this presents a chance to earn substantial rewards. “Consumers should brace themselves for sizable bonuses,” Holzhauer advises. Yet, there’s a caveat: inflation. In essence, the value of reward points and miles is determined by the company. If they flood the market with cheap rewards to stimulate spending and attract new clients, each reward could depreciate. Companies have the flexibility to alter reward values at will. For instance, an airline ticket to Europe once priced at 100,000 points might suddenly require 250,000 points due to rapid inflation, rendering the rewards less beneficial.

While credit card rewards offer enticing perks, they come with limitations. If you maintain a balance on your card, the interest you pay likely exceeds the value of your rewards. Additionally, be aware of any expiration dates attached to your rewards; utilize them before they vanish.

Given the potential for rewards value fluctuations, it’s wise to redeem them regularly. Saving $50 monthly on groceries through cashback equates to the same benefit as earning a $600 airline ticket annually.