If you’re one of the many consumers utilizing points-and-rewards credit cards offered in collaboration between airlines and major banks, you might find yourself pondering a crucial question: What’s the actual dollar value of the points I’ve diligently accrued? Moreover, how much spending is necessary to unlock the most advantageous rewards?
These uncertainties were at the forefront of discussions during a joint hearing convened on Thursday by the Department of Transportation and the Consumer Financial Protection Bureau. The aim? To delve into avenues for enhancing consumers’ interactions with — and financial gains from — these widely embraced programs, known to yield substantial profits for major airlines.
“Understanding the True Worth of Points and Rewards”
Rohit Chopra, Director of the CFPB, articulated the significance of such credit card benefits for families planning trips or vacations. He remarked, “[Credit card] benefits are really valuable. … It’s almost seen as savings – something in the bank that you will be able to spend.” However, Chopra also underscored a disconcerting reality: the potential for credit card companies and airlines to swiftly devalue accumulated points, thereby obfuscating their true worth and sparking questions about fairness.
Adding to the complexity, Chopra highlighted instances where consumers might incur fees for rewards cards without clear avenues for refunds when benefits are altered or diminished.
Another focal point of the hearing was the plight of consumers who utilize rewards cards while carrying revolving debt. According to a CFPB report released concurrently with the hearing, such consumers tend to pay significantly more in interest and fees compared to the rewards they receive.
The panel, featuring Chopra, Secretary of Transportation Peter Buttigieg, along with consumer advocates, and representatives from small airlines, a credit union, and a bank, convened to address these concerns. Notably absent were representatives from major airlines and top-tier credit card issuers, despite invitations extended by CFPB and DOT officials.
“Challenges and Considerations in Maximizing Benefits”
Prior to the hearing, Rob Nichols, President and CEO of the American Bankers Association, issued a statement emphasizing the competitive landscape of the credit card market in the US. Nichols cited a Morning Consult survey indicating widespread consumer appreciation for credit card rewards. He also referenced congressional legislation aiming to lower interchange fees, a move fiercely opposed by banks, citing potential risks to rewards program availability.
Post-hearing, financial services analyst Jaret Seiberg highlighted potential regulatory actions by the CFPB to safeguard earned miles from devaluation and prevent their expiration. However, Seiberg noted that the outcome might hinge on the political landscape, with differing expectations depending on the administration in power.
