Credit Card Rewards: A Lucrative Game for Issuers, But Consumers Often Leave Money on the Table
The Allure of Rewards
Credit card rewards have become a major draw for consumers, with nearly 90% of all credit card spending occurring on rewards cards. But while these perks can be enticing, many cardholders fail to redeem their rewards, leaving hundreds of millions of dollars on the table each year.
A “Bait-and-Switch” Scheme?
The Consumer Financial Protection Bureau (CFPB) has taken aim at credit card issuers, accusing them of operating “bait-and-switch” rewards programs that illegally devalue earned rewards points and airline miles or prevent cardholders from earning or redeeming rewards. According to the CFPB, consumers forfeit around $500 million in rewards annually.
Consumers Struggle to Redeem Rewards
A recent survey by Bankrate found that nearly 1 in 4 cardholders (23%) did not redeem any rewards at all in 2024. Travel rewards, in particular, can be notoriously difficult to redeem, with only 11% of rewards cardholders redeeming for a free hotel stay and just 10% redeeming for a free flight.
Industry Pushback
The Consumer Bankers Association and the American Bankers Association have pushed back against the CFPB’s claims, arguing that credit card rewards programs are highly popular and deliver tremendous value to consumers. They point out that complaints regarding rewards make up only a small share of all credit card complaints reported to the CFPB.
Choosing the Right Rewards Card
When deciding on a new credit card, 83% of cardholders say their final decision comes down to perks. Cash back rewards are the most popular, with 58% of credit card users preferring them over miles or points. However, experts recommend choosing a cash-back card with a low or no annual fee, as the benefits of cash back or other perks can be quickly eroded if you carry a balance.
The Importance of Redeeming Rewards
“Failing to redeem your rewards is a major missed opportunity,” said Bankrate’s senior industry analyst Ted Rossman. “While the best rewards can be subjective, the worst reward is getting nothing at all.” By redeeming your rewards and paying your credit card off on time and in full each month, you can reap the benefits of “almost like free money.”
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