Last week, I told you about a weird new policy at CitiBank and Amex where they will withhold points when you do not pay your card on time.     My conclusion was that there is nothing wrong with that policy, you should have to abide by your side of the agreement and pay your bill on time if you want your reward miles.    In my mind, that is the whole point of a reward.

The Frugal Travel Guy Agrees

It seems that noted reward card expert Richard Ingersoll, AKA the Frugal Travel Guy shares the same opinion.    In his post he cites this article from the Chicago Tribune and notes, “Any move that banks can make to help people become more responsible with their credit, I am all in favor of……To any of you that are in that boat, for your own sake, stop for a minute and think about what you are doing.”

While I agree with the policy from a fairness standpoint, he takes it a bit further in saying that the policy and the reinstatement fee is a good incentive to pay your bill on time.     Immediately after I posted my article, I realized that I had neglected to mention another critical point about this new policy.     Frankly, if you are late paying your credit card bill, the last thing that you should be worried about is your frequent flier miles.    Remember, reward cards should ONLY for people who ALWAYS pay their bill IN FULL and ON TIME! If you are paying your bill late, you are getting hit with interest at a penalty rate and late fees that will dwarf the value of almost any reward.   Compared to a $50 late fee, a few thousand points or miles are peanuts.

Remember, even the most valuable rewards are lucky to be worth 3 or 4 cents a mile, with many worth far less.      Delta miles, for example, are usually worth closer to 1 cent than 2.    So you would have to have a bill of several thousand dollars just to come close to the value of the late fee by itself, let alone the interest.    Add some “reinstatement fee” , and you can see that you are forking over far more dollars than your miles are worth when you pay late, under almost any scenario.