As with everything else that banks are offering as of late, it all boils down to, well… the bottom line. The usual drill nowadays seems to be following a “lure ’em, catch ’em, and leave ’em” approach. If a product or service doesn’t generate enough income to merit a continued program, then the way for banks to go is easy enough – cut the program or raise the fees.

Credit Cards
Credit Cards, Photo by Galib A.

And no, the Credit Card Act of 2009 doesn’t make plastic any safer now as compared to previous months. It only means that credit card companies now have to find more innovative ways of making up for lost revenue. For instance, Bank of America recently announced it will be imposing annual fees ranging from $29 to $99, right after saying it won’t be raising interest rate hikes before the second phase of the CARD Act goes into effect on February 2010.

Now on top of all these rate-hiking, fee-adding, and credit limit-cutting, card issuers have found another way to improve their bottom line – making changes in how a credit cardholder can avail of rewards points. These policies have become  so stringent that for many consumers, it means saying goodbye to in-flight upgrades, free hotel stays, or that “something” they’ve saved up for and looked forward to.

If you aren’t yet aware of any changes made to your credit cards rewards program, you might find your answer in the following updates:

  • Most major credit card companies including American Express, Bank of America, Chase, Discover, Capital One and Citibank will invalidate any rewards points accumulated in a billing cycle during which a cardholder’s account was delinquent.
  • Discover Bank goes a step further by revoking all point or miles earned by an accountholder under the rewards program if he is late in his payments for two consecutive months.
  • Discover’s three-tier cash back program is now down to just two tiers. In the company’s previous scheme, a consumer earns 0.25% percent for the first $1,500 spent, 0.5% for the next $1,500, and 1% for whatever amount spent above $3,000. Presently, the program has been reduced to just 0.25% for the first $3,000 and 1% for anything over that.
  • American Express scaled back the rebate for its Blue Card cash-back program, now offering 1.25% instead of the previous 1.5%.
  • American Express is also increasing the maximum fee that accountholders under its Membership Rewards program would need to shoulder to transfer earned points to a U.S. airline loyalty program. From $75, the cost is now at $99 effective last September.
  • Citibank has also made changes to its travel redemption program. A domestic round-trip airline ticket worth about $400 used to cost the cardholder 20,000 points. Now redemption for the same item will require 40,000 points.
  • Starting next year, the Citi Hilton Honors Visa will require 12,500 points, up from 10,000, for a free room.
  • The Citi Home Depot Rewards MasterCard will be discontinued. Cardholders can only use them until October 31, while rewards points may be redeemed only until January 31, 2010.
  • The Citi mtvU Visa card, which allows students to earn points that are convertible to cash for student loan payments, now requires 12,700 points for every $100. That used to be 10,000 points.

What could come as an even more unpleasant surprise for credit card customers is that card issuers have the right to change the terms and conditions of their rewards program – or even cancel it altogether – at any time and for any reason.

And don’t expect these changes to go away anytime soon, because they’re not. As banks need to make difficult decisions about balancing profitability and service, consumers also need to act fast and cash in on their rewards points while they still can.

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