4 Ways Credit Cards Can Change the Terms on You

Credit cards offer many benefits. They’re a great way to manage short-term cash flow, build your credit score and of course, earn rewards. As Canadians, we love our credit card rewards, but that doesn’t mean we love jumping through hoops to redeem them. What was once a rewarding rewards program, can turn into a pain in the neck.

Let’s take a look at four ways credit cards can change the terms and what you can do to counteract them as a cardholder.

Devaluing Rewards

Sometimes credit cards that used to be rewarding lose some luster after changes to the program. It’s seems to becoming more common in the credit card industry for banks to do something known as “devaluing” rewards points. It goes something like this. Let’s say it used to cost you 4,000 reward points to go on a trip to Cuba. Suddenly, it now costs you 4,400 points. Even though the number of points you’ve earned stays the same, it’s now more costly to go on your dream trip. Air Miles recently did this with its travel rewards program. The best way to avoid having your points devalued is rather than stockpiling them, use them up sooner rather than later.

Changing Rewards

Another way banks can change your reward program is by changing the actual rewards you can earn. Let’s use Air Miles again in this example. Air Miles cardholders used to be able to redeem their miles for gift cards. Unfortunately, that’s no longer the case. Gift cards were removed a while ago, leaving cardholders with less options to use their miles. If you see a reward that you really like, don’t wait to redeem your points. Do it soon because you never know when the option might be taken away.

Expiring Rewards

Most reward programs have a rule about point expiration. For example, if you don’t use your credit card for, say, a year, your card’s considered inactive and you’ll forfeit your reward points. Loyalty is a two way street, so this make sense. To avoid an unpleasant situation like this, make sure to regularly use your credit card every couple months to avoid losing the miles you worked so hard to earn.

Even if you regularly use your credit card, your points may still be able to expire. A few years ago Aeroplan tried to introduce a policy that would see points start to expire if not used by a certain date. Air Miles tried to introduce a similar policy more recently. Luckily, there’s legislation being introduced in Ontario to ban the expiration of rewards in this situation, but if you’re in the other provinces, you should still read the fine print and watch for expiring points. The last thing you want to do is give up all the points you worked so hard to earn.

Fees and Penalties

Credit cards are a powerful financial tool – as long as you avoid the costly fees and penalties. It’s fairly common practice for credit cards to introduce new fees and penalties. For example, your credit card may up the foreign exchange fee or start charging you a fee for paper statements. Changes to the cardholder agreement must be sent to you in writing. While it’s not the most interesting thing in the world, take the time to read any literature that your bank sends you. It could contain important changes to your program. Ignorance isn’t a valid excuse for being dinged with new fees.

The Bottom Line

By paying close attention to any changes your bank makes to your credit card, you won’t be surprised by new fees and changes to the reward program. To avoid changes to rewards, you might want to consider switching to a simple cash back credit card. That way you won’t have to jump through as many hoops to get the rewards (money) that you rightfully earned.