Slice and Dice: Card Companies Slash Rewards Programs

Credit card consumers are under assault from all fronts, the latest being a sustained, industry-wide cutback on credit card rewards programs.

The trend toward lower reward options doesn’t make much sense at first glance — after all, what business wants to alienate its most loyal customers?

But card companies continue to struggle. According to the Web site LowCards.com, delinquency rates at five of the top six credit card issuers increased in September. With more cardholders owing more money, credit card companies have to look elsewhere to beef up the bottom line. And with tough restrictions coming from the Credit Card Reform Act (which kicks off in February), their options are limited.

"Issuers can't continue losing money. They have to find ways to make up the revenue, even if this angers Congress and consumers," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. "To make matters worse for issuers, some fees and rate hikes will be prohibited after certain provisions of the CARD Act goes into effect in February.”

That leaves rewards programs in the crosshairs of the credit card companies. Here are some of the ways that card issuers are pruning back on rewards programs.

Late payment triggers. The primary hammer that card issuers are wielding is through late payments. More and more card issuers, including Bank of America (Stock Quote: BAC), Chase (Stock Quote: JPM) and American Express (Stock Quote: AXP) are canceling reward points built up in a period where the card holder hasn’t paid his or her bill.

Very late payers. If you’re behind on your card payment by two months, some card companies will cancel your accumulated reward points outright. Discover Bank (Stock Quote: DFS) will cancel reward points for missing two straight monthly payments.