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The Consumer Financial Protection Bureau (CFPB) warned

December, 24, 2024-02:14

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The Consumer Financial Protection Bureau (CFPB) warned

A prominent consumer advocacy organization is targeting credit card companies regarding a significant issue affecting millions of Americans: the diminishing value of rewards points and airline miles.
For years, consumers have accumulated credit card points with the intention of redeeming them for flights, hotel accommodations, or cash. However, since the onset of the Covid-19 pandemic, the worth of these points has consistently decreased, as inflation has diminished their purchasing power, leaving numerous cardholders feeling dissatisfied.

The Consumer Financial Protection Bureau (CFPB) has raised concerns that major credit card issuers, including American Express, may be breaching legal standards through this practice. The agency alleges that these companies entice customers with attractive rewards and benefits, only to fall short of fulfilling those promises.
Credit card issuers that obscure the conditions for earning or maintaining rewards in fine print may be engaging in unlawful activities, according to the CFPB. The agency has already initiated actions against firms like American Express and Bank of America for illegal conduct related to their rewards programs, as detailed in a communication sent to other law enforcement bodies.

Companies such as American Express and JPMorgan Chase have faced criticism as the value of points has continued to decline in the aftermath of the Covid-19 pandemic, exacerbated by inflation. Historically, a point redeemed through online banking has been valued at approximately one cent. However, this cent has lost about 20 percent of its purchasing power since 2018, as reported by the Bureau of Labor Statistics. Consequently, the value of a point has similarly decreased, as noted by The Wall Street Journal.

For instance, 50,000 points accumulated with a major credit card issuer in 2020 were valued at around 41,300 points in October of this year, according to the publication. As of 2022, three-quarters of all general-purpose credit cards were classified as rewards cards, as reported by Reuters. Many consumers select their credit card based on the rewards offered, according to the CFPB, which highlights that issuers frequently promote cash, points, and miles as sign-up incentives.