Credit Card Reward Programs Changing
If you plan to use your Citi credit card Thank You points to book a flight for a summer vacation, do it soon because Citi is changing its redemption rules on
March 1. Cardholders of other reward cards should pay attention, because Citi is not the only issuer making changes.
On March 1, Citi's Thank You Network shifts from a fixed point system to a variable point system, and redemption will require 100 points per $1. Hence, a $400 flight will require 40,000 points. Under the current fixed point system, you can redeem 20,000 Thank You points for any domestic coach flight up to $400 in value.
Citi is not the only issuer to change its reward structure. In October of 2008, Capital One dropped its tiered system for a more simple calculation of adding two zeroes to the cost of the flight or the hotel room. A $300 flight requires 30,000 points. A $100 hotel room requires 10,000 points.
"Capital One is promoting this as a simpler way of understanding and using your points. It is much simpler, but it can also be more costly for cardholders redeeming their points. For years, the industry standard has been 25,000 points for a domestic roundtrip airline ticket. The changes are reducing the value of your reward points used for travel," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "Before you use your points to book travel, make sure that your reward structure hasn't changed and that you know what your conversion will be.
"It is interesting to watch the trends in this industry and how issuers find new ways to make money. A few years ago, issuers raised standard fees and changed the fee structure. They added the default clause in the terms and conditions, and gave themselves permission to raise rates at any time for any reason," says Hardekopf. "Now the changes are a little more subtle, and require cardholders to pay attention to the notices they receive in the mail, or they could get caught by the changes. Even if these changes haven't happened to your card yet, be aware of them and know what to look for. If one issuer makes a change, often many of the others
will follow."
Here are some additional changes recently made by credit card issuers:
*This month, Chase added a $10 monthly fee and increased the minimum payment from 2 to 5% for cardholders who have carried a large balance for over two years and pay only the minimum each month. "While this minimum payment increase is good for forcing cardholders to pay down their balance, this monthly fee has created an outcry from affected cardholders," says Hardekopf.
*Citi has increased the conditions to receive bonus miles. A year ago, Citi PremierPass Elite Level offered 15,000 bonus points if the first purchase was made within 60 days of the account opening. Today, the same card offers 20,000 bonus points after $600 in purchases within three months. "They increased the bonus miles, but if you don't reach the minimum purchase, you don't get the bonus miles," says Hardekopf.
*Discover has also increased conditions to receive bonus miles. Discover once offered 12,000 bonus points. Now, it offers 1,000 Bonus Miles each calendar month that you make a purchase for 12 months from the date your account is opened, with a cap of 12,000 Bonus Miles.
"It is important to read the terms and conditions of any rewards card that you applying for to understand the details of redeeming the rewards you will earn," says Hardekopf.
March 1. Cardholders of other reward cards should pay attention, because Citi is not the only issuer making changes.
On March 1, Citi's Thank You Network shifts from a fixed point system to a variable point system, and redemption will require 100 points per $1. Hence, a $400 flight will require 40,000 points. Under the current fixed point system, you can redeem 20,000 Thank You points for any domestic coach flight up to $400 in value.
Citi is not the only issuer to change its reward structure. In October of 2008, Capital One dropped its tiered system for a more simple calculation of adding two zeroes to the cost of the flight or the hotel room. A $300 flight requires 30,000 points. A $100 hotel room requires 10,000 points.
"Capital One is promoting this as a simpler way of understanding and using your points. It is much simpler, but it can also be more costly for cardholders redeeming their points. For years, the industry standard has been 25,000 points for a domestic roundtrip airline ticket. The changes are reducing the value of your reward points used for travel," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "Before you use your points to book travel, make sure that your reward structure hasn't changed and that you know what your conversion will be.
"It is interesting to watch the trends in this industry and how issuers find new ways to make money. A few years ago, issuers raised standard fees and changed the fee structure. They added the default clause in the terms and conditions, and gave themselves permission to raise rates at any time for any reason," says Hardekopf. "Now the changes are a little more subtle, and require cardholders to pay attention to the notices they receive in the mail, or they could get caught by the changes. Even if these changes haven't happened to your card yet, be aware of them and know what to look for. If one issuer makes a change, often many of the others
will follow."
Here are some additional changes recently made by credit card issuers:
*This month, Chase added a $10 monthly fee and increased the minimum payment from 2 to 5% for cardholders who have carried a large balance for over two years and pay only the minimum each month. "While this minimum payment increase is good for forcing cardholders to pay down their balance, this monthly fee has created an outcry from affected cardholders," says Hardekopf.
*Citi has increased the conditions to receive bonus miles. A year ago, Citi PremierPass Elite Level offered 15,000 bonus points if the first purchase was made within 60 days of the account opening. Today, the same card offers 20,000 bonus points after $600 in purchases within three months. "They increased the bonus miles, but if you don't reach the minimum purchase, you don't get the bonus miles," says Hardekopf.
*Discover has also increased conditions to receive bonus miles. Discover once offered 12,000 bonus points. Now, it offers 1,000 Bonus Miles each calendar month that you make a purchase for 12 months from the date your account is opened, with a cap of 12,000 Bonus Miles.
"It is important to read the terms and conditions of any rewards card that you applying for to understand the details of redeeming the rewards you will earn," says Hardekopf.
