BALTIMORE — Travelers are discovering their points and miles aren't taking them as far as they used to. A government agency is now warning credit card companies against devaluing rewards programs.
Many credit card holders choose their cards based on the rewards.
“We charge everything we buy,” said Sharon Freedman, an avid traveler.
Freedman collects Marriott Bonvoy points, which she's turned into free hotel stays all around the world.
“I have done at least 25 nights in rewards,” said Freedman.
But travelers enrolled in these credit card and travel rewards programs have reported needing more points for the same award redemptions.
“That's what the Consumer Financial Protection Bureau is looking into. If I sign for this credit card with the promise that I could do X or Y with these points, then I should be able to do that with them,” said Ryan Smith, news managing editor for Upgraded Points.
Upgraded Points helps travelers understand how to get the most out of their points and miles and they've noticed companies devaluing them. Now, the Consumer Financial Protection Bureau (CFPB) is warning those actions may be unlawful.
“Bait-and-switch was the term that came up,” said Smith.
When deciding on a credit card, consumers justify the particularly high interest rates and fees with the expectation that the benefits will outweigh the costs then they learn those points aren't worth what they were told.
“If you're not paying your credit card bill in full, then the consumers probably wind up paying more in interest every month than the value of the rewards that they're getting,” Smith added.
According to the CFPB, 75 percent of general purpose credit cards were reward cards. And in 2022, consumers earned more than $40 billion in rewards, a 50 percent increase over 2019. Companies factor these rewards into their bottom lines and make adjustments.
“What they will do is adjust the pricing of those in order to better match the amount of miles that are floating around, especially on the awards that people are booking the most often,” said Smith.
Flying Blue, the rewards program for Air France, KLM, and other airlines recently changed its redemption structure. According to Travel on Points, award flights for business class increased by 20 percent and 25 percent for economy class.
In an email to WMAR-2 News Mallory Sofastaii, a Flying Blue spokesperson said this "wasn't quite a deval, but rather a rebalance." They did this to address concerns that customers weren't able to find award seats at the lowest fares. By rebalancing, they've increased entry-level award availability by 30 to 50 percent and maintain that even with the new pricing levels, they're still among the most competitively priced.
"While we can certainly appreciate that nobody likes price increases, the reality is this change ensures better access to rewards for all our members, avoiding the frustration seen in some programs where limited availability (be it award tickets, upgrades, etc.) undermines member benefits. We remain committed to listening, innovating, and delivering meaningful value to our Flying Blue members."
And Upgraded Points found award redemption increases for high-end Hilton properties. WMAR-2 News reached out to Hilton. A spokesperson sent the statement below:
"Hilton Honors routinely monitors the program’s performance and recently conducted a series of business-as-usual changes to our standard room Point pricing for a number of hotels across the portfolio. Hilton is fully committed to delivering the best value to our members and carefully considers any Point adjustments for Hilton properties."
“Is that unfair to consumers? The CFPB tends to think so. Can they enforce that? Not necessarily, and who will enforce it as the Administration changes is a huge question mark right now,” said Smith.
What travelers can control is how they spend their rewards. Smith recommends “earning and burning.”
“Points and miles are not a good long-term investment because the programs change what your points are worth semi-regularly,” said Smith.
Travelers shouldn’t spend them frivolously, but Smith warns against hoarding. Gift card redemption typically gets you the least value, so Smith says to use them for trips in the near future like a special birthday or holiday travel when cash prices are high.
The CFPB launched an Explore Credit Cards tool to help people make apples-to-apples comparisons about options in the credit card market. This is an unbiased, comprehensive data for more than 500 cards that's available to everyone.