As someone who owns not just one, but two airline credit cards, I can attest to the benefits that come with them. Personally, my Southwest Rapid Rewards card and my United MileagePlus card more than justify their annual fees through the rewards points I earn. Furthermore, the perks such as free checked bags make these cards even more valuable. However, I acknowledge that my spending and travel habits may not be the same as everyone else’s.
Recently, the Department of Transportation (DOT) and the Consumer Financial Protection Bureau (CFPB) have been considering new regulations on credit card rewards programs, particularly those associated with airlines. One of the main concerns raised at a joint hearing was the higher interest rates that often come with rewards cards compared to regular credit cards. Additionally, consumers tend to make more frequent and expensive purchases when using rewards cards, leading to a rise in credit card debt.
According to CFPB director Rohit Chopra, Americans paid a staggering $130 billion in credit card interest and fees in 2022, with credit card balances increasing by 10%. This surge in credit card debt has been attributed in part to the allure of airline rewards cards. Many consumers treat their points as a form of savings, not realizing that airlines have the power to devalue points or change redemption prices at their discretion.
During the hearing, panelists, particularly those representing consumer groups, criticized airline co-branded credit card programs for their lack of transparency and point devaluations. The practice of increasing reward redemption prices without clear communication to consumers was likened to a bait-and-switch tactic that could harm cardholders.
Despite the criticisms, there are differing perspectives on airline credit card rewards programs. Some, like Tiffany Funk from Point.me, believe that loyalty programs are self-regulating and airlines have a vested interest in keeping customers engaged positively. However, Funk also recommends diversifying rewards points by choosing flexible cards that allow point transfers to various airlines.
The debate on whether airline credit card rewards programs are worth it is ongoing. While there are certainly benefits to be gained from these cards, consumers need to be aware of the potential risks such as high interest rates and point devaluations. Choosing the right credit card based on individual spending habits and travel patterns is essential to maximizing the value of rewards points. Ultimately, consumers must weigh the pros and cons before deciding whether to participate in airline credit card programs.