Buzz
In response to the pandemic, rewards credit cards have adapted by offering longer timeframes for earning sign-up bonuses and shifting rewards away from travel-related benefits.
Once the economy starts recovering—albeit slowly—from the pandemic's impact, don't expect your credit cards to revert to their pre-crisis forms immediately. Much like every other aspect of life, credit cards will follow a 'new normal,' and if you recall the 2008 financial crisis, some of the long-term consequences of the pandemic may seem eerily familiar.
The more desirable your card is, the more significant changes you're likely to experience, according to the experts we've consulted.
The reason behind this is that premium cards promise significant value in exchange for their high annual fees, which puts pressure on them to deliver.
According to Brett Holzhauer, a travel rewards expert at ValuePenguin, 'These credit card issuers are trying to figure out ways to incentivize people to continue spending...so they can feel that the credit card is a justified purchase at a premium of about $500 a year.'
Here are some possible changes to expect in the coming months.
Lifestyle rewards might continue to be available
Holzhauer suggests that benefits such as earning points for grocery shopping, ordering takeout, or receiving discounts on streaming services could remain post-pandemic if they continue to appeal to consumers.
However, don’t expect all of your pandemic-related perks to stick around indefinitely.
'The new reward categories feel a bit like letting the genie out of the bottle. It’s a fundamental change to the card’s perks, and I wonder if cardholders will get a little too accustomed to those rewards. What will happen when those rewards disappear?' asked Steven Dashiell, a credit card expert at Finder. He believes some of the recent additions and concessions will only be available for a short time once the economy begins to recover.
It’s also important to note that some lifestyle-focused perks, which go beyond just travel or earning points, were already being introduced before the pandemic, like DoorDash and Lyft memberships for some Chase customers and Uber credits for certain American Express cardholders.
Travel rewards might lose their appeal
Regarding those lifestyle perks that focus less on travel, Holzhauer pointed out that travel cards aren’t the only way to derive value from a credit card. A cash-back card might actually suit your needs better.
'A lot of people in the points and miles space have looked down on cash-back cards, but I don’t think they’re a bad option at all,' he said. While you may not be able to travel for free using your earnings, cash-back cards offer consistency and a greater sense of satisfaction knowing you're 'getting' something in return for your card usage.
'This is going to separate the serious travelers from those who take just one or two trips a year,' Holzhauer noted. While he and his wife, who travel full-time, know they’ll be able to use their earnings later, travel will be off the table for many credit cardholders for potentially years to come.
'This is a great time to evaluate your strategy and ask, 'Is this card really providing me with the best value?' he said.
Cash-back card issuers will undoubtedly be prepared for consumers who wish to switch from a travel-focused card to a cash-back card, so keep an eye out if you're considering making a change.
Expect generous signup bonuses, but be prepared for some downsides.
Although new credit access may be limited for now, Holzhauer explained that once the economy begins to recover, card issuers will be ready to attract new customers with massive signup bonus offers.
'Consumers need to understand that these bonuses are going to be substantial and come in full force,' he said.
The issue with credit card rewards is that they are entirely arbitrary.
There’s no universal standard for the value of your points or miles, nor a consistent requirement to earn a free flight or hotel stay. Airlines and hotel chains have the freedom to price these points however they see fit.
But in tough times, this could mean striking it lucky—at least, for a short while.
A quick trip down memory lane: After the last financial crisis, airlines sold a large volume of miles to credit card issuers at bargain bulk prices. This deal benefited both sides: airlines wanted to fill their flights, while credit card issuers aimed to attract and retain customers.
The only catch? When more miles are printed, their value decreases, Holzhauer explained. Rewards partners can reduce their worth at any time.
It’s similar to a hotel chain selling a lot of points, but then deciding to raise the cost of a hotel stay—from 30,000 points per night to 150,000 points per night. You might have the points, but do you really want to use them all for just one night?
The same scenario that occurred 10 years ago is expected to happen again. Dave Grossman, a loyalty program consultant and founder of MilesTalk, noted that Hilton sold $1 billion worth of points to American Express in April, and Marriott sold $920 million of points to Chase and American Express in early May. 'In mid-April, both United and Delta were reportedly considering similar sales,' he said.
'I would anticipate spending bonuses for existing cardholders in the near term, with bigger signup bonuses in the longer term,' Grossman said.
The ongoing concern that your points will lose value over time is a major reason Grossman suggests choosing cards that let you transfer your points or miles to a range of travel partners, allowing you to secure the best deal when it's time to book. This is also why we promote an 'earn-and-burn' rewards strategy here at Mytour.
However, if travel isn't an option for the next few months, you might find yourself holding onto those points and hoping their value doesn’t diminish.
