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Why rewards credit cards aren’t going away

Major banks have scaled back credit card rewards in recent years, but this travel writer thinks the future of travel hacking is still safe.

Over the past five years or so, airline miles, hotel points, and credit card rewards have helped my family of eight travel in ways we would never have thought possible. A $6,500 cross-country Amtrak train trip, Disney World, a helicopter ride over the Mediterranean, and a first-class trip around the world are a few of the experiences we’ve enjoyed since my wife and I opened our first rewards credit cards in 2013.

We’ve earned and spent millions of miles and points to travel, so I took notice when I saw an article in The Wall Street Journal entitled Rewards Credit Cards Gained a Fanatic Following—Now Banks Are Pulling Back (paywall).

The article itself is balanced. It discusses some of the ways that banks are pulling back on credit card rewards and the dilemma that banks face in trying to attract new customers without too much of a hit to the bottom line.

I found the WSJ reader comments to be beyond interesting. Some of the responses suggested that people who have made use of credit card rewards in the past are concerned they’ll have to go back to paying full price for travel!

Credit card rewards ebb and flow

People have been talking about the end of credit card rewards for many years. In 2011, the U.S. Mint stopped allowing credit card purchases of $1 coins, putting an end to a loophole that allowed people to rack up millions of credit card reward points and miles.

In actuality, the credit card rewards landscape is constantly changing, and strategies are always evolving. What worked yesterday might not work today, and what works today may not work tomorrow.

It is true that in many cases banks are tightening up the terms for their rewards programs. For example, American Express has a relatively new (and more restrictive) policy on who can earn a welcome bonus as a new cardholder. If you’ve ever earned the welcome bonus for a card, you can’t earn it again, even if you closed the card and years have passed. Other companies limit the number of applications or cards that can open in a specific time period. These policies are meant to curtail a process called churning – opening a new card just to earn the lucrative bonus, and then canceling the card once the bonus is earned.

But as long as banks are willing to pay to attract new customers, they will offer avenues and opportunities for average credit card holders to use rewards to travel on the cheap.

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The outlook on credit card rewards in 2019 and beyond

An incredible amount of value can still be had through the smart use of credit card rewards.

It seems likely that consumers will continue to be able to take free or nearly free family vacations by obtaining one or two new cards and using them for all normal spending in order to accrue the rewards needed more quickly. In my opinion, I don’t see indications that this is likely to change any time soon.

It goes without saying (but I’ll say it anyway) that the key to a rewards strategy is to pay off your balance each and every month. You might earn 5 percent back on a purchase, but the high amounts of interest charged for any balance you carry could quickly undermine your overall strategy. Don’t use a card to make purchases that you can’t already afford.

The state of the economy has an impact on how credit cards are marketed. Generally, when the economy is less robust, fewer people sign up for credit cards. This may cause banks to offer more incentives to attract new customers. It’s not out of the realm of possibility that those incentives could include continued or even enhanced credit card reward offers in the future.

Here’s to another successful year of traveling.

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Dan Miller runs Points With A Crew – a travel site focusing on helping families (especially larger families) travel for free/cheap. Since 2013, he has used miles and points to travel with his wife and 6 children to California, Yellowstone, Puerto Rico, Disney World, Sweden, Greece, Peru, and more.

The opinions expressed in this article are the author’s own. Haven Life Insurance Agency offers this as educational information only. Haven Life does not endorse or offer the companies, products, services and/or strategies discussed here.

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About Adam Weinberg

Adam Weinberg is the Brand Director for Haven Life, where he’s working hard to make life insurance easy. Adam is a creative problem solver who uses unique brand moments to create meaningful customer experiences.  Adam has more than a decade of diverse editorial, marketing, and branding experience, including work on several award-winning campaigns for various digital media companies.

Read more by Adam Weinberg

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

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