Bank Reward Programs Not So Rewarding for Travel

Last week, the Wall Street Journal reported on an important side effect of the financial problems of Citigroup and other banks: Credit-card rewards programs are vanishing, especially for travel.

On March 1, Citibank will make a key change to its ThankYou Rewards program for its credit-card holders. You'll have to spend a certain amount each month on your card before you'll be able to earn points for travel.

And travel rewards will become more difficult to redeem, according to a story broken by the Frugal Travel Guy. For example, today you can redeem ThankYou Points for different types of tickets once you've reached a threshold, such as by redeeming 90,000 ThankYou Points for a business-class ticket worth up to $2,700. But under the system the company is about to set up, you'll need to have 100 points per every $1 of airfare. So a $2,700 business-class ticket will now require 270,000 points.

(Citibank defends its move by saying that it will now include the price of taxes and fees as part of its reward. Right now, members have to pay the airline taxes and fees for reward tickets.)

Other news items:
"Last month, American Express eliminated double miles for shopping in a broad range of categories on its Delta SkyMiles card." This may be partly driven by Delta's merger of its frequent flier program with Northwest's program.

"Chase scaled back the cash-back bonus opportunities on its Freedom card for new customers."

"Capital One's new No Hassle Rewards Card requires customers to spend at least $1,000 a month in order to earn double miles for each dollar above that threshold. (Customers earn one mile per dollar spent on all other, non-travel purchases.)"

Banks partly blame the airlines, some of which are hiking the mileage thresholds required to redeem free flights.

Banks are also getting more likely to revoke your points before you get a chance to use them. Says the Journal:

If you're late, not only will you likely see your interest rate jump, but you'll also probably forfeit reward points. Under American Express' Membership Rewards program, for example, members who pay late will forfeit their points for that month (although they can reinstate those points by paying a $29 fee).

The short take: Don't bank those points. If you have a stockpile of rewards points, consider redeeming them for rewards now before they are likely to be devalued.