Why Your Credit Card Rewards Could Be in Danger

Will credit card companies be scaling back their rewards programs to save money?

As a consumer, you're no doubt aware that when you're in the market for a new credit card, you have a host of options to choose from. And generally, the rewards you're offered, whether they're in the form of travel perks or a sign-up bonus, are what prompt you to choose one card over another. 

But although it's easy to get comfortable with the credit card rewards you're currently enjoying, new data from the Consumer Financial Protection Bureau (CFPB) indicates that these programs could be in trouble. In its 2019 Consumer Credit Card Market report, the CFPB notes that the cost of offering rewards programs has risen in recent years as credit card companies compete for applicants.

Traveling woman using credit card

Image source: Getty Images

Since the first quarter of 2015, there's been an 84% increase in total rewards-related expenses. That reflects both an increase in rewards accounts and an increased cost per card. As of 2018, each rewards card cost its issuer $167 on average, up from $139 in 2015. And if that cost keeps climbing, there may come a point when credit card companies cease to be able to afford it. 

Issuers are already cutting back

Given the abundance of rewards cards out there, the notion of cutting out benefits may seem like a problem reserved for the very distant future. But actually, credit card companies are already cutting back on certain perks -- namely, purchase protection, return protection, auto rental insurance, and lost baggage protection, reports the CFPB. Furthermore, many of today's rewards programs are anywhere from mildly to annoyingly restrictive in nature -- for example, some cards' rewards expire after a limited period of time, while others impose blackout dates on travel-related redemptions. 

The result? Cardholders are already enjoying fewer perks, and the value of existing rewards is already eroding. 

Fees could climb, too

But it's not just credit card rewards that may be in danger: The CFPB reports that increases in annual fees may be on the horizon, too. Since 2015, nearly 25% of credit cards have imposed an annual fee, compared to just 16% in 2015. And rewards cards are particularly likely to charge fees for the privilege of having them.

What will your credit card rewards look like in the future?

The chances of credit card rewards going away completely are fairly slim. After all, without rewards, credit card issuers could struggle to attract or retain consumers. But will the structure of today's rewards programs change in the future? Quite possibly, especially if the costs involved are prohibitive for credit card issuers to maintain. 

If you're reliant on your credit card rewards and don't want to lose out on the perks you currently enjoy, then your best bet is to keep your credit score in excellent territory. That way, if issuers are forced to skimp on rewards, you'll be among the elite few who get to capitalize on the best offers out there. 

You can boost your credit score, or maintain an already high number, by making your bill payments on time, using 30% or less of your available credit at once, having a healthy mix of types of debt, and not opening too many new accounts at the same time. Also, don't rush to close old credit cards you're no longer using; keeping them could give you a stronger credit history, which will also help your score. 

Hopefully, we won't see too drastic a decline on the credit card rewards front. But for now, keep enjoying those perks while you can -- you never know when they might go away.

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