How Credit Card Rewards Will Change After the Pandemic
Reward credit cards are adapting to the coronavirus by offering extended windows for sign-up bonuses and turning rewards away from travel.
But when the economy recovers – albeit slowly – from the shock of the pandemic, don’t expect your credit cards to return to their previous state immediately. Like every other aspect of your life, credit cards will have a “new normal” – and if you think back to the 2008 financial crisis, some of the long-term consequences of the coronavirus may sound familiar to you.
According to the experts we interviewed, the more attractive your card is, the more likely you are to see major changes.
This is because these high-end cards claim to offer great value in exchange for their costly annual fees, which forces them to keep shipping.
“These credit card issuers are trying to find ways to encourage people to keep spending … so they can feel like a credit card is a worthwhile purchase at a premium of [about] $ 500 per year,” said Brett Holzhauer, Travel Awards. ValuePenguin expert.
Here are some potential changes to look out for in the next few months.
Lifestyle rewards can stay
Holzhauer predicts lifestyle benefits such as earning points for grocery shopping and ordering food to go, or discounts on streaming services that could remain after the pandemic if they resonate with consumers.
But don’t expect all of your pandemic-era benefits to last forever.
“The new award categories are a bit like releasing a genie from a bottle. This is a fundamental change in card privileges, and I have to wonder if cardholders are going to get too used to these rewards. What happens when these rewards disappear? Asked Stephen Dashiell, a credit card expert at Finder . He suspects that some of the recent additions and perks added by issuers to their cards will be available for a short period after the economy begins to recover.
But it’s worth noting that some of the more lifestyle-focused perks beyond travel or direct point-earning opportunities began popping up long before the coronavirus was in our minds, such as access to DoorDash and Lyft memberships for some Chase customers and Uber credits for select American Express card holders .
Travel rewards can lose their luster
Talking about lifestyle-related benefits that focus less on travel, Holzhauer stressed that travel passes aren’t the only way to benefit from a credit card. You may find that a refund card is more suitable for you.
“A lot of people in places with points and miles have looked down on refund cards, but I don’t think that’s a bad option at all,” he said. You may not be able to travel for free with your earnings, but you will have consistency and potentially more satisfaction in the fact that you “get” something in return for using your card.
“This will weed out avid travelers from those who make one or two trips a year,” said Holzhauer. Although he and his wife, who travel on a regular basis, know they will spend their earnings later, many credit card holders will not travel for years.
“This is a good time to take a look at your strategy and ask, ‘Does this card really give me the best value? ” he said
Refund card issuers are sure to be prepared for consumers looking to switch from a travel-focused card to a cash-back card, so keep an eye out if you’re thinking about making a difference.
Expect Big Sign Up Bonuses, But Prepare For The Returns
While the peg to the new loan may be short right now , when the economy begins to recover, card issuers will be ready to attract new customers with huge signup bonus offers, Holzhauer said.
“Consumers need to know that these bonuses are going to be big and they will skyrocket,” he said.
But the problem with credit card rewards is that they are completely fictional.
There is no standard for how much your points or miles are worth or how much you need to earn to earn a free flight or hotel stay. Airlines and hotel chains can sell these points at any price.
But that means you can hit the jackpot during tough times – at least not for long.
Fast travel back in time: Since the last financial crash, airlines have sold tons of miles to credit card issuers at very low wholesale prices. It helped both sides: airlines wanted to fill planes with travelers, and credit card issuers wanted to attract and retain customers.
The only problem? “If you print more miles, they don’t cost that much,” Holzhauer explained. Reward partners can devalue them at any time.
It’s like a hotel chain sold a bunch of points, but then decided that a hotel that previously cost you 30,000 points per night will now cost you 150,000 points per night. You may have points in your account, but want to use them all for one night?
The same scenario that happened 10 years ago is likely to happen again. Dave Grossman, loyalty program consultant and founder of MilesTalk , noted that Hilton sold $ 1 billion in points to American Express in April and Marriott sold $ 920 million in points to Chase and American Express in early May. “In mid-April, United and Delta were thinking about similar sales,” he said.
“I would expect to spend bonuses for existing cardholders in the near future and increase signup bonuses in the long term,” Grossman said.
This ongoing fear that your points will lose value over time is an important reason why Grossman recommends cards that allow you to transfer points or miles to various travel partners so you can get the best deal when it’s time to book. And that’s why we at Lifehacker promote the “Earn and Burn” philosophy of rewards.
But if travel is closed for at least the next few months, you may find yourself holding onto these points and having to leave their value to chance.