Credit Card Rewards Points: Use 'em Soon, or Lose 'em?

Are you one of those people who charges almost everything on your credit card, even a cup of coffee at Starbucks, just so you can accumulate reward points to get free trips or gifts?

It seems that some credit card companies are rewarding your loyalty by canceling your card, and taking back all those accumulated points. We're talking about big companies, like American Express and Discover card.

That's what happened to longtime American Express cardholder Jillian Ivey, a Southern California attorney who says she always pays her Amex bill on time. In January, Amex canceled her card, and wouldn't give her an exact reason. When she called to complain, Amex told her she not only lost her credit card, but she also lost the 105,000 membership rewards points she'd saved, to take a big trip abroad.

In fact, the Terms and Conditions for Amex's Membership Rewards program states, "If for any reason we cancel any account, any points accrued in your program account will be forfeited."

Ivey called Amex at least three times to see if there was anything she could do to get those points back. She invited me to listen in on two of those calls. I heard Amex customer service reps say over and over that there was nothing they could do to reinstate Ivey's lost reward points. The points were gone. Period.

Amex isn't the only credit card company doing this. For example, if you have a Discover card, read the fine print in your agreement. It also says, "If your account is closed for any reason ... your miles will be forfeited." Discover tells me this same rule applies to their other reward point programs.

"It's stealing," says Dr. Robert Manning, a professor at the Rochester Institute of Technology, who's an expert on the credit card industry.

Manning says, "Amex is ultimately saving itself money by stealing back those points" from long-standing customers, because, he says it costs the company when cardholders redeem their points for travel or other rewards.

Some credit card companies, like Capital One, are a bit more lenient with their reward points when customers cards are canceled. Cap One has been jacking up interest rates on many longtime customers. If you decline their rate increase, they'll cancel your card, but they do give you until May 17 to redeem your reward points.

But back to American Express. I called American Express Public Relations Department in New York, to ask how they could basically take back reward points from good, long-standing customers.

It seems Amex is telling customers one thing, and telling the media something else. Amex spokeswoman Desiree Fish told me the company is "making accommodations for card members who are in good standing at the time of cancellation," and allowing them 90 days to redeem their membership rewards points.

Really? I asked Amex if they've notified customers of this apparent change of policy. Fish said they plan to send out a letter in mid-April. But until then, she claims, all you have to do is talk to a customer service rep, and if you're a customer in "good standing," they'll reinstate your miles.

I wondered, did Jillian Ivey just get connected with a few uninformed customer service reps, who didn't know they could give her back her points?

So, I listened in when another Amex cardholder, businessman Shabi Asghar called Amex. Amex recently canceled Asghar's Black card and he lost seven million reward points. Yes, seven million points!

Once again, I heard the Amex rep tell him there was absolutely no way at all he could get those lost points back. He argued with her, and she wouldn't budge.

So, is there a way you can avoid losing rewards points you've saved for so long? First, read the fine print in your credit cards rewards program and make sure you know the rules. And, consider redeeming some or all of those points soon. Some companies will send you a check for the value of the points, or give you gift cards at major retailers.

In these volatile economic times, when credit card companies are closing accounts with no warning and for no clear reason, it might make sense to use those points sooner rather than later.

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