Be aware of the black holes in rewards cards

When it comes to credit cards, it should not be a surprise that there are black holes that could drain out all those precious reward points.

Ever think you could lose rewards if you miss a credit card payment? What about if you haven't traveled much in the past two years and didn't earn points by staying at the right hotel?

KEEPING AN EYE ON REWARDS

— Unused rewards points can disappear when you die. Some programs will allow you to transfer miles to an heir but a fee may be charged.

— The Consumer Financial Protection Bureau accepts consumer complaints on credit cards and other financial products. See http:/ www.consumerfinance.gov/complaint. Or call 855-411-2372.

— Many credit cards connected with airline frequent flier programs also include expiration dates for using rewards, according to Credit.com.

— Be aware that the rules change for how many points it takes to earn a ticket or trinket. You'd get a notice of the changes, but you need to pay attention as well.

Source: Detroit Free Press research

Many consumers pick their plastic based on the kind of rewards they can receive on a credit card.

"Rewards programs, however, can be highly complex, with detailed, confusing rules about how consumers can actually use their rewards," according to the federal consumer financial watchdog agency.

The Consumer Financial Protection Bureau pointed out recently that some disclosure issues, including rewards programs, continue to be problematic, even after the Credit Card Accountability, Responsibility and Disclosure Act of 2009.

The bureau plans to review disclosures for credit card rewards. The bureau's public complaint database has received more than 600 credit card complaints from consumers who reported that they had issues with "rewards" offered.

On the positive side, the consumer bureau noted that the CARD Act has reduced penalty fees and made the cost of credit cards clearer in many ways to consumers.

But the bureau does see room for improved disclosures. Other areas of concern: Consumers who pay online may not see the disclosures that are required to appear on monthly statements. And many consumers may not yet realize that once they carry a credit card balance into a new month, they no longer enjoy a grace period on new purchases. Interest is charged on new purchases, if the balance is not paid in full each month.

As for those rewards, well, you might not understand the rules unless you go back to the full terms and conditions in the credit card agreement that's sent when you first become a cardholder.

Anisha Sekar, vice president for credit and debit products at NerdWallet.com, said consumers can become particularly confused when cards are tied to hotel or airline points. They might not realize, she said, that they can lose rewards if they go even a year without earning more points, depending on the rewards program.

"Consumers are pretty much at the mercy of the credit card companies," Sekar said.

It may not help matters that our wallets are filled with travel-related rewards and loyalty cards, loyalty cards from restaurants and stores, and credit card and debit card rewards programs. Who can keep track?

Most consumers just prefer cash back as a reward, according to a 2012 study by Javelin Strategy & Research. But consumers use all sorts of rewards, including points redeemable in a specific catalog or online shopping mall, coupons or vouchers that can be used at a specific merchant, airline miles, credits to statements, and hotel, vacation or other travel-related points, according to Javelin's survey.

Some rewards earned via credit cards have limited windows. Rewards on the Toys R Us MasterCard credit card issued by GE Capital Retail Bank, for example, have expiration dates for spending at the toy store.

When it comes to cash-back credit cards, though, about 65 percent have no expiration, according to a Bankrate.com survey. The cards that do have an expiration date typically give a three-year to five-year window before the points expire, according to Greg McBride, senior financial analyst for Bankrate.com.

Experts warn that rewards can be lost or taken away for reasons, such as:

— Missing a payment. Say you charged a large amount for holiday shopping one month but then failed to make the monthly payment or didn't make that payment on time. You could lose the rewards that you had built up for that month. Some card issuers have a way to reinstate those rewards, but there may be a costly fee, according to Bill Hardekopf, CEO of LowCards.com in Birmingham, Ala., a website that provides credit card information for consumers.

The reinstatement fee for American Express is $35 for each billing period and each card account for which you reinstate points. American Express also requires that you reinstate points within 24 months of forfeiting them to get the points back.

— Closing your account. Rewards won't transfer with you. So make sure to use the rewards before closing an account. Some card issuers, such as American Express, offer a 30-day window for using credit card rewards after you've closed the account.

Chase, for example, noted that if a credit card account is closed following delinquency, the customer may forfeit his or her reward balance.

— Taking an item back. Do not think of rewards as refundable. I used a rewards certificate that I received via a retail card to buy a dress, and then I changed my mind. Whoops, the $25 reward disappeared when I returned that dress.

Gerri Detweiler, director of consumer education at Credit.com, said one of the biggest risks, of course, is that people simply forget about any rewards that they built up on the card. Or they just don't have time to spend those rewards.

"I once accumulated enough points for a trip to Alaska on Alaska Airlines but for a variety of reasons, never ended up using them," Detweiler said.

"Eventually, I canceled the card and my points went with it," she said.

Susan Tompor is the personal finance columnist for the Detroit Free Press.


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