Loosing Your Rewards

You work hard to find the right card with the best rewards, you don’t want to loose them. The Wall Street Journal recently explored some of the way that you can loose your hard earned rewards. Lets see what they came up with.

Rule 1: Miss A Payment

This is, of course, always very good advice. According to their research, credit card companies have different policies on rewards when you miss a payment or are late. With Amex you lose your reward if you pay late, with Discover you need to miss two late payments. On the other hand, what use is your reward if it comes with some $39 late payment fee and 20% interest on all charges for the last two months. The good news is that if you are consistently on time with your payments, and you happen to pay late once, the credit card companies will likely waive their fees. The key is to call and ask. Finally, everyone who plays the reward card game should be paying all of their bills electronically. If you are still paying by writing checks and licking envelopes and stamps, wake up! It is 2009 and there is so much interest, stress, and saliva to be saved by spending a little time getting to know your bank’s electronic payment web site.

Rule No. 2. Gloss over the Fine Print.

Here they point out that the fine print of your cardmember agreement is constanlty changing. The implication is that your reward points will always go down in value. This is a reasonable assumption. As time goes on, you are likely to loose reward points and/or those points will loose their value. It is up to you to keep track of their value by trying to read their unreadable terms and conditions. Short of that, stay up to date with web sites like this one that track changes to the various reward programs.

Rule No. 3. Don’t Use Your Card.

This rule says that their are expiration dates on many programs if you do not use them. Airlines are the most notorious for zeroing out balances due to inactivity, but the credit card companies are doing their best to catch up.

Rule No. 4. Save up for the big-ticket, aspirational rewards.

This is a tough one. The article correctly notes that reward terms and conditions can change at anytime, and you can bet that they are going to make it harder to redeem your reward. In fact, if you are saving up for a long time for a big reward, you are betting that they won’t, and it is a loosing bet.

On the other hand, I use reward cards to save up for big rewards quite frequently. Last year, I flew with my wife to the middle east, in business class, due in no small part to points earned in reward cards. Later this year, if all goes well, I hope to do the same again. The key is to set reasonable goals. In each case, I saw the opportunity for a “big-ticket, aspirational reward” that I could potentially earn within a few months. I then sprinted to the finish line, collecting airline points from various sources in a whirlwind of activity such as credit card sign up bonuses, hotel promotions, rental cars, dining, and occasionally actually flying on a airplane (who knew they still handed out airline points for that?). In the end, I took minimal risk by not spending years and years saving for an award. This year, I am working a similar strategy with a different airline. If all goes well, it will be only a few months from when I began saving for the award, until I am able to redeem it.

The article concludes by mentioning the Schwab and Fidelity related credit cards as where consumers are now tending to look for rewards. These cash back cards are earning 2% and 1.5% cash back respectively. If you are not consistently receiving over 2% back in actual value for your reward, it might be time to give up the points and miles game and go to one of these cash cards.

Personally, I have been getting as much as 4-6% back in travel rewards through my Starwood card, redeeming points for hotels and frequent flier miles. I have been both persistent and lucky in some of the rewards I have taken care of. For those of you who don’t have the time and energy that I put into this game, a cash back card may be the best way to go.

For the rest of you, keep playing, but play to win. The credit card companies are doing their best to trip you up, it is up to you to follow their rules to win the game.