10 Ways You Can Lose Your Credit Card Rewards and How to Avoid It

FT Contributor
An upset man, who has lost his rewards, holding a credit card.

A rewards credit card is one that offers users a variety of rewards for using the card to make purchases. Many people find rewards cards beneficial, as the rewards can come in the form of points, travel miles, and even cash back depending on the company offering it. Common types of rewards cards include:

  • Cashback rewards credit cards.
  • General reward points credit cards.
  • Hotel or travel points credit cards.
  • Retail reward credit cards.
  • Gasoline points credit cards.
  • Rebate credit cards.

Earning credit card rewards can take a lot of time and money. Therefore, knowing how to accumulate rewards is important when using a rewards card. It’s also important to understand how not to lose the rewards you work hard to earn. Once rewards are lost, they are usually lost forever.

It may be surprising to know that losing rewards is possible, but below you’ll find details on the most common ways credit card points can be lost. Whether you’re looking for a credit card that offers rewards or you simply want to ensure you’re using your rewards optimally, these are a few ways you could risk losing rewards and tips on how to avoid doing so.

Table of Contents

1. Late or Missed Payments

Late payments have a number of negative repercussions on credit, but late or missed payments can also cause your rewards to suffer. Making late payments might progressively, or immediately result in the loss of the rewards you have accumulated. While it’s important to make payments on time to ensure your account remains credited with your rewards, on-time payments are also vital to maintaining a decent credit score.  

2. Inactive or Unused Card

In order to earn rewards, you have to use your credit card. If a card is not used, it is not only not accumulating rewards, but it could be at risk of getting inactivated, too. An inactive card is at risk of being shut down by the credit card company you obtained it from.

To prevent a card from being shut down due to inactivity, it’s best to use the card at least once every one to three months. Each credit card company has its own terms in regard to shutting down an account with inactivity, so be sure to consult their policy for specific information.

3. Rewards Expire

Not every credit card company has a rewards program with no expiration date, but some do. Pay attention to the expiration date for your rewards, if applicable, so that you can use them before they expire. In most cases, you can apply your rewards as a statement credit for future use, but consult your credit card company’s rewards terms to see if this is possible.

Whether your rewards have expired or not, they are typically not taxed. The IRS has not pursued a tax enforcement program with respect to promotional benefits.

4. Closed Credit Card

If you decide that you no longer want a credit card, you will most likely have to forfeit the rewards you have earned. Most card issuers have a clause that states closing a card will result in the forfeit of rewards.

In some cases, you may be able to transfer your rewards or loyalty programs to another credit card with the same rewards program. Further, you may be able to transfer those rewards to a partnering hotel or airline partner loyalty program before closing an account. Consult your credit card company’s policy to see if this is a viable option.  

Note that rewards you may have earned as signup bonuses can be lost if you choose to close the card account too soon. To prevent this and take advantage of those signup bonuses, maintain the credit card account for at least a year.

5. Breaking the Rules, Gaming the System, or Committing Fraud

Credit card companies are aware of the ways people try to scam the system and earn rewards. For example, closing a card too soon after receiving the rewards bonus is a red flag to the credit card company, and many have implemented a policy that prevents that from happening.

Signing up repeatedly for multiple credit card accounts just to earn the signup bonuses is known as “credit card churning.” This is a popular practice with travel rewards credit cards, as they typically offer a substantial amount of miles when you sign up for a card.  

While credit card companies are pretty savvy to these scams, there are other ways of “gaming the system.” People are always trying creative ways of accumulating points, but they are often frowned upon. If you try them, you may lose the rewards you have earned. Similarly, violations of the rewards program or attempting to buy or sell rewards can also result in reward loss.

6. Returning Items That Gained Rewards

Many credit cards offer rewards for specific purchases, such as big-ticket items. However, purchasing items and then returning them can result in reward loss. It is not bad to return something if you can’t afford it, but you will most likely have to give up the points if you do so. They can always be accumulated later with a different purchase. Note that it might be best to return items and lose the gained points rather than keep the item, miss payments, and lose all of your points while destroying your credit score.

7. Bankruptcy

If you have to file for bankruptcy, it may result in rewards loss. Additionally, filing for bankruptcy can damage your credit score. Depending on the chapter you filed, bankruptcy can remain on your record for seven to 10 years, making it difficult to apply for loans or open new credit card accounts. It will take time to rebuild your credit score and apply for a new card with a rewards program, but it is not impossible.

8. Purchases Outside of Rewards Categories

Many rewards systems work by encouraging specific purchases. It could be that you must make purchases with your credit card from a specific retailer or your purchase must be of a designated product or service. Making purchases outside of those options that provide you with rewards won’t necessarily cause you to “lose” rewards, but you won’t be earning them either. To avoid missing an opportunity to earn rewards, be strategic with your purchases.

9. Credit Card Rewards Changes

Credit card issuers may change rewards programs. This is something you are not in control of but should be paying attention to. Oftentimes, credit card issuers will let cardholders know of changes before they are put into effect. If there is a change that is going to affect your rewards, it is best to use them before you lose them.

10. The Issuer Cancels the Program

Similar to rewards changes, credit card issuers may cancel rewards programs altogether. Some card issuer agreements mention that they can terminate the program at any time without notice. While there’s nothing you can do, you can minimize the chances of this happening by staying in good standing with your card company and closely monitoring their rewards terms. Generally, avoid point hoarding and opt for cashback programs whenever possible to consistently take advantage of your rewards.

Avoid missing out on your credit card rewards with these tips.

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