credit card rewards

CFPB Reveals Top 4 Challenges Consumers Face with Credit Card Rewards

ByGail Kellner Last Updated:

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Securing a slice of the consumer credit card market has become increasingly competitive. Credit Card companies dangle splashy welcome offers and lucrative cash back rewards in front of consumers to get them to apply for new cards. Do they over-promise and under-deliver? Perhaps.

The Consumer Financial Protection Bureau (CFPB) notes a 70% increase in complaints from consumers regarding difficulties with credit card rewards in 2023. That’s a big issue for the gang here at Allcards, since saving and investing our credit card rewards is the focus of this site. We call it Rewards Stacking.

So we dug into the CFPB’s report. Here are the four recurring themes.

4 Difficulties Consumers Face with Credit Card Rewards

1. Rewards are denied for reasons hidden in the fine print

All credit cards have pages of fine print detailing the terms of the rewards and bonuses that consumers eagerly await when they apply for a new card. Hidden in this fine print is important information like what qualifies as an eligible purchase, how rewards are classified, and how often you can earn a bonus. The CFPB went so far as to call this a “bait and switch” as some consumers report not receiving the rewards they thought they were getting when they applied.

Occasionally, there appears to be no reason at all for being denied a welcome offer. There are some stories about this on Reddit with users calling it pop up jail.

2. Companies can devalue rewards

Travel rewards cards can change the value of points or miles so you’ll need more points to get the same level of benefit. In the past, hotels and airlines valued rewards according to set pricing. Now, many loyalty programs have switched to dynamic pricing, which means prices depend on consumer demand. It’s difficult to determine how much points are worth this way.

3. Consumers are unable to redeem benefits due to technical issues, delays, or doom loops

When consumers attempt to redeem rewards, many complain of slow processing times. Sometimes it can take months for a credit card company to credit a customer’s account. This is a problem when offers are time-sensitive and delays void the offer.

Sometimes technical glitches are to blame, such as system updates or crediting the wrong account when consumers have similar names.

Travel rewards credit cards often have airline or hotel partners so that consumers can redeem points easily, at least in theory. However, when a credit card company and an airline are involved in a transaction, problems can arise. Numerous consumers complain of “doom loops.” A doom loop occurs when the credit card company tells you to call the airline and the airline tells you that you need to call your credit card company. The cycle continues, seemingly forever.

4. Credit card companies can revoke or cancel rewards

Customers report frustration when reward programs are discontinued or devalued, and points or miles earned are clawed back. Canceling your credit card almost always results in losing rewards, but some customers complain that earned rewards on open accounts were reduced or canceled without any notice.

Credit card companies sometimes cancel inactive accounts and revoke accumulated rewards. Credit card companies usually have a line in the fine print about reserving the right to change reward programs at any time.

How Can You Protect Yourself?

1. Read the fine print

This is probably the biggest takeaway of the CFPB’s report. Yes, everyone knows the fine print on a credit card agreement is less than scintillating reading, but it’s important. Credit card companies are banking on the fact that most people never read the fine print. You’ll find out what purchases qualify, what purchases do not qualify (gift cards, gambling, etc), and how often you can claim a welcome offer. Some credit card companies limit welcome offers to one every two years.

2. Choose rewards you can easily redeem

Cash back rewards are straightforward, cash is cash. You won’t get caught in doom loops when trying to exchange your accumulated miles for a flight to Mexico. True, travel rewards cards can offer a bigger bang for your buck but understand you have to do more legwork to make them worthwhile.

Read more: The Hidden Cost of Redeeming Ultimate Reward Points for Travel Through Chase

Another good point is to pay off your balance every month. Earning 5% cash back isn’t going to boost your bottom line if you’re paying 20% in interest.

3. Remember to redeem your rewards

It’s tempting to save up rewards until you have enough for a flight to Australia, but it’s probably smarter to use them right away. By the time you have enough miles saved up, the cost of the flight might be far more than you anticipated.

Bottom Line

Credit card companies are banking on consumers not reading the terms of the credit card agreement. So far, the CFPB has not taken any action against credit card companies, so it’s up to you to protect yourself. Read the terms and conditions, and only apply for credit cards with rewards that suit your spending.

Gail Kellner is an editorial assistant and contributing writer for Allcards.com and DoughRoller.net. According to family lore, money was one of her first words (“Mun-ya”) and ever since then, she’s been fascinated with money and investing. She has a B.A. in Psychology from Western CT State University and an M.S. in College Student Personnel from Indiana State University. She lives with her husband, two sons, and various fur-children in Westfield, MA. In her spare time, she writes YA and children’s fiction, reads, and enjoys a good nap.