Travel and dining rewards don’t mean much when you can’t travel or dine. Here’s how credit card companies are fighting to keep your business — and your money
Dave Grossman spent seven months planning his blowout honeymoon, which was supposed to happen in April. The plan was to fly business class on Qatar Airways to the Maldives using miles; spend six nights at the Waldorf Astoria Maldives using Hilton points, then a week in Sri Lanka; and then fly home to New York in the Etihad First Class apartments. Grossman estimates the flights and hotel stays he booked on miles and points were worth close to $40,000.
Admittedly, Grossman isn’t the average credit card user. He maintains several dozen cards that he uses strategically to optimize rewards, and has made a career out of the practice as founder and editor of credit card rewards resources MilesTalk.com and YourBestCreditCards.com. But he, like just about every other traveler in the world, has had his plans derailed due to COVID-19.
And so have the card companies competing for his business. While it’s hard to quantify the sheer scope of the credit card rewards points industry, it’s safe to say it’s massive, especially for travel brands. When Delta extended its contract with American Express in 2019, the airline said it expected to be making $7 billion annually by 2023 from the deal — and that’s just one airline. Card issuers buy points from airlines and hotels to offer their cardmembers. In April, Hilton said it sold $1 billion worth of points in its Hilton Honors loyalty program to American Express. But now, with travel at a near standstill and sharp declines in consumer spending overall, the credit card industry has had to change its approach to points and perks.
Cards that were once focused on travel and dining area, like all of us, embracing life at home. Airline cards are now offering extra points on grocery store purchases. Hotel-branded cards that come loaded with hundreds of dollars of resort credit — funds earmarked for spending at a certain hotel or resort chain — are instead counting everyday restaurant takeout and delivery purchases against those amounts. Cardholders today can get credit toward their cell phone bills and Netflix charges, or use monthly Uber ride-hailing credits toward UberEats food delivery instead.
“Everyone has been scrambling to try and give people more value,” says Benét Wilson, credit cards editor for the Points Guy, a website covering travel and loyalty. “They want to keep people, they don’t want you to start dropping their cards.”
They’re right to be worried. Annual fees for high-end travel rewards cards can reach hundreds of dollars annually. These fees are easier to swallow when you’re using points and credits to book a five-star suite in Bali, but might feel less valuable when you’re using the pricey card to buy toilet paper. Ted Rossman, an industry analyst with creditcards.com, was surprised by the backlash when Chase Sapphire raised its annual fee by $100 in January to a total of $550. “I heard from a lot of people that they already thought the card was a splurge and that the extra $100 did make a difference to them.” In response to COVID-19, Chase has started offering $100 credits to offset the increase.
Acacia N., a marketing manager in Los Angeles who requested we don’t use her full name, is questioning her own high-annual-fee card. While her points won’t expire, she says she’s not thrilled with the type of benefits the card offers in lieu of travel. “The high fee now comes with Lyft and DoorDash credits, but I’m not flying, can’t exactly use Lyft right now, and I won’t support DoorDash or other food delivery services until they improve worker and restaurant pay,” she says. “I’m used to earning a lot of points with this card, saving for our honeymoon, but I’m not sure the $450 fee is worth it without being able to travel or dine out like we used to.”
This, according to Rossman, is proof there’s a tipping point when it comes to the high fees premium travel cards charge. “The more people deal with unemployment and really take a hard look at their finances, we may see some more pushback there,” he says.
More than a third of American consumers say the most important reason they use one credit card over another is because of the type of rewards it offers. An additional 25 percent said they chose a first-choice card because of a higher rewards rate, according to data from Business Insider Intelligence.
“I used to really only use my card for travel or dining out, like picking up the tab while out with friends,” says Laura Faustman, a consultant in Oakland, California. “I am not a big spender personally, so I tend to seize whatever opportunity I can to capitalize on transactions that have two or three times the points per dollar. Picking up the $500 tab for a group dinner and squaring up after the fact is usually worth the effort.”
While group dining — or group anything — is pretty much off the table these days, Wilson says in the wake of COVID-19 there are now “tons” of new offers and programs, with more added every day. (Hint: Open those promotional emails from your card provider!) She says every card has a benefits guide that outlines every perk, new and old, and you should be able to find yours online. Most offers don’t require you to do anything besides use the card to get the benefits, but read the fine print. For example, American Express’s definition of a grocery store doesn’t include specialty food stores, so your local fishmonger or produce shop is probably off the table. Big-box stores like Target with dedicated grocery sections aren’t included either.
But “there are only so many categories you can add, so when everyone adds the same ones it makes it — for someone with multiple cards at least — less valuable,” says Chris Hutchins, another so-called points optimizer and head of autonomous financial planning at Wealthfront. Where previously, consumers often carried several cards to take advantage of different perk categories — one for buying plane tickets, another for everyday purchases, and a third for hotel stays — that doesn’t always make sense anymore, as your new COVID-era benefits might overlap. “I now somehow have four grocery cards, whereas a couple months ago I just had one,” says Hutchins.
Additionally, the benefit of getting a new card — which often includes a free bonus of up to 50,000 miles or more — isn’t the same as it was a few months ago. “I can’t use the miles I’m going to get,” Hutchins says. “Even if I get a signup bonus, it’s not like I’m booking trips right now.” One way airline card issuers are combatting this is by allowing credit card purchases to count toward status points. Previously, you’d have to actually travel to get those, in most cases. That’s helpful for people wanting to achieve new status, but most U.S. airlines and hotel chains have already extended existing status through 2021.
If you have signed up for a new card in the last four or five months, The Points Guy’s Wilson says that you’ll probably have more time to spend money to get the valuable signup bonuses. “Normally, let’s say you get an American Express Platinum. You would have three months to spend $5,000 on it to get 50,000 points and a welcome offer signup bonus. Most of the credit card issuers have extended it to six months because they realize that people are not going to be able to spend that much money in that three month period,” she says.
Really, you don’t need to maintain a drawer full of credit cards to get the most out of the ones you’re already carrying. If an annual fee totaling several hundred dollars is too much right now, experts suggest downgrading to a lower-fee version of the same card. “You can preserve the card, preserve the credit, and keep the card number. It’s not a new inquiry, but they’ll pro-ratedly refund you the higher annual fee for the lower one, and you can always re-upgrade again later,” says Grossman.
For instance, a Platinum Amex can be downgraded to Gold or Green while maintaining Membership Rewards points. The top-of-the-line Citi Prestige can be downgraded to the Premier or Rewards+ cards without losing ThankYou Points. Hutchins cautions that some card issuers may allow you to downgrade your card to another card that isn’t part of the same rewards program, which could result in losing your points balance or losing the ability to use them in certain ways, so check first. “For example, you may no longer be able to use them to transfer to partner airlines,” he says.
Then, of course there’s the time-tested trick of picking up the phone. “Call the card issuer and say, look, I’m not happy about this,” says Wilson. “Don’t call and say ‘I’m going to get rid of my card,’ say ‘I’m thinking about it because it’s cost prohibitive and i’m not getting what I thought I was going to get.’” Companies are handling these requests on an individual basis, she says, and some customers are getting annual fee credit, bonus points, or retention bonuses.
Just like the pandemic, no one is certain how long these offers and changes might last. Most of these new promotions are limited-time offers, running through the end of June or July, and whether they’re extended depends on the fate of the travel industry at large. Wilson says it could be hard for credit card companies to roll back bonus points for things like grocery shopping and food delivery if people are happy earning points that way. But when travel resumes — whenever that is — it’s possible cardholders could see their points and perks return to pre-pandemic normal.
Dave Grossman is hoping to rebook his South Asian honeymoon for later this year, using a mix of credit card points and frequent flier miles. But so far, he hasn’t had luck beyond securing one hotel stay. “I’m still trying to accrue points as fast as I can. [COVID-19] hasn’t changed my behavior at all — except for where they’re offering the bonus points on groceries,” he says. “I’m all over that.”