7 ways you can lose credit card rewards points

You sweat over your spending for months or years to rack up enough rewards to jet off on a trip of a lifetime. But your dreams can be dashed quickly if you commit an infraction that causes your card issuer to yank your rewards.

“They can disappear,” says Ira Rheingold, executive director of the National Association of Consumer Advocates.

One of the most common ways to lose rewards is by returning an item, in which case you likely will lose the points, miles or cash back earned on that purchase.

However, there are at least seven other ways you can forfeit your points or miles that are spelled out in the fine print of many rewards program agreements. You could lose your rewards in the following scenarios:

The rewards expire

With most major credit card rewards programs, except for airline rewards, points do not expire as long as the card is active.

Consumers should find out upfront if the points in their card program expire, and they should record expiration dates to avoid losing points, says Rosemarie Clancy, former vice president of content and marketing for RewardExpert.

“Some rewards have a shelf life,” she says. For example, the Citi ThankYou rewards program, the rewards on some cards never expire while others expire after three or five years.

If you have a co-branded airline card in which miles get deposited right into your frequent flyer account, you might need some kind of activity on the account every 18 months or so to keep your miles from expiring, depending on the program.

“Expiration is a big issue, so you need to consistently check your stockpiles,” Clancy says.

You miss a monthly payment

Most card issuers require a cardholder to keep an account in good standing in order to use and keep rewards. Policies vary, but most issuers take away your points only if your account becomes seriously delinquent.

If that happens, getting your rewards back could cost you. American Express states in its Membership Rewards terms and conditions that a cardholder who fails to pay the amount due on a bill by the closing date of the next billing period forfeits all the rewards earned during the time covered by the unpaid statement. However, a cardholder can get the rewards reinstated through the Amex online portal by paying the bill plus a $35 fee. Points must be reinstated within a year or they will be forfeited permanently, Amex warns.

Other issuers may not charge you, but still require you to jump through hoops. For example, the Citi ThankYou rewards program will not allow a late payer to redeem any points until the account is brought current and the cardholder requests point reinstatement online or by phone. The Chase Ultimate Rewards agreements for various cards state that cardholders 60 days late on payment will be temporarily barred from using points. The rewards will automatically become usable again in the next billing cycle after the account is brought current.

If you completely default on any card, you’ll likely lose your points altogether. For example, the Chase agreements state that if you go 60 days from a payment due date without paying the minimum due, your account may be closed and your points taken away permanently.

Points are a reward for using the card and paying as agreed, says Nessa Feddis,  senior vice president with the American Bankers Association. “It doesn’t make sense to, in effect, give money, in the form of points, to someone who is not paying what he or she owes,” she says.

Card inactivity

If your credit card issuer cancels your account for inactivity, your points disappear. Some issuers might take away your rewards immediately. For example, the Bank of America® Travel Rewards credit card terms and conditions state that your points will be forfeited if your account is closed for any reason.

However, many issuers offer a grace period during which you can redeem rewards. The American Express agreement allows a cardholder 90 days to use points after an account is closed for inactivity. Citi will wait 60 days after closing an inactive credit card account to close a ThankYou rewards account. Once the ThankYou account is closed, points go away. And in the case of an account closed just for inactivity, Chase allows a customer 30 days to use remaining points.

Financial troubles

Some issuers consider financial difficulties a reason to take your points. For example, Chase Ultimate Rewards card agreements state that the company can take away your points if you file for bankruptcy.

The reality is that by the time most people file for bankruptcy, they already have lost their points or miles by getting far behind on payments, says Edward Boltz, a North Carolina bankruptcy attorney and partner in the Law Offices of John T. Orcutt. However, some consumers do file for bankruptcy while still current on credit card bills, and it makes sense that a lender would want to keep open the option of taking away any remaining points in that situation, he says, if the cards are closed or the balances were wiped out in bankruptcy.

First, if you owe, say, $6,000 or $8,000, and the issuer knows they could lose that money, they don’t want you to get the perks earned on that spending, too, Boltz says. Second, the issuer might want to protect against a bankruptcy trustee treating rewards as an asset. For example, they don’t want a trustee to say, “Oh, you have 60,000 frequent flyer miles, I’ll cash in that for a flight and sell it to the highest bidder,” he says.

You break the rules

Most issuers warn that they will take points away if you run afoul of program rules, for example, by trying to sell your points, or if you commit fraud.

American Express states that if you try to earn or use points fraudulently, they may take away your points and close your cards. And Wells Fargo states that it can determine at its “sole discretion” whether you have misused the program, as does Capital One.

Some card issuers also have cracked down on “churning” rewards cards, which is signing up for a new card just to get bonuses, then closing those cards and signing up for more.

For example, Chase agreements state that the issuer may take away your points if you “misuse” the program by “repeatedly opening” cards just to generate rewards. The Chase 5/24 rule, which can get you turned down for a credit card if you’ve opened five-plus card accounts with any bank within a two-year period, is an attempt to discourage consumers from opening cards just to take advantage of promotional offers.

Card issuer changes the reward program

In most agreements, the fine print mentions that the issuer may cancel the rewards program. If that happens, cardholders in many cases will have a few months to redeem rewards.

For example, if the program is ever canceled, Chase will allow Ultimate Rewards members 30 days to use their points. And the Citi ThankYou rewards program will allow consumers 90 days to use points. However, the Capital One Venture rewards agreement simply states that the issuer can terminate the program at any time without notice.

You can minimize the chances of losing your rewards for any reason by keeping your account in good standing, monitoring it closely and following the rules.

If you have an airline co-branded card and your points go directly into your frequent flyer account the points become subject to the terms and conditions of that account, not those of your credit card issuer. The same applies if your card issuer allows you to transfer points into a frequent flyer or hotel loyalty account, and you make that move.

One way to avoid having points sit around for too long is to consider switching to a cash back program, Rheingold says.

Canceling your credit card account

You can lose your rewards when closing your credit card account before using or transferring your points.

In this case, you can double check with your credit card issuer to see if you are allowed to transfer your rewards. Several credit cards enable you to transfer your rewards as long as it’s under the same rewards program.

However, some credit card issuers  let you redeem your rewards for a certain time after you close your account. For example, Citi ThankYou rewards terms states that you can redeem your rewards within 60 days after closing or converting your account.

Bottom line

Consumers spend time and money to earn rewards, so losing them is like wasting an investment. You can redeem your rewards strategically as long as you follow your card issuer’s rules and plan ahead if you’re closing an account.