Editorial Policy

7 signs your rewards card isn't rewarding anymore

Allie Johnson

October 30, 2013

You had high hopes when you signed up for that rewards card — and visions of flights around the world, gift cards galore or lots of cash back.

But rewards card dreams don't always come true: A card that looked great might turn out to be a bad match for you, experts say. Or the terms of the card — or your life circumstances — can change.

So, how do you know when your rewards card is no longer rewarding? Here are seven reasons to consider a change:

1. You start carrying a balance.

Many consumers open rewards cards with good intentions: to charge most regular expenses, earn as many points as possible and pay the balance in full each month. But it's easy to get tripped up and start carrying a balance, says Lance Cothern, a CPA and blogger at Money, Life and More. And rewards cards typically have interest rates several points higher than cards with fewer bells and whistles.

“The interest you pay is going to more than eat away your rewards,” Cothern says.

If you find yourself in this situation, consider switching to a basic low-interest card or finding a low-interest balance transfer deal. Then focus on getting out of debt and getting your finances in order before trying to earn rewards again, Cothern says.

2. You move.

You live in an airline's hub city, carry the co-branded rewards card and fly the airline regularly. But then you move. Should you switch to a different card? That depends on where you move and how often you plan to continue to fly that airline, says Greg Meyer, community relations manager for Meriwest Credit Union.

If you won't be flying the airline much anymore — especially if it's a smaller regional airline without a lot of flights into and out of your new city — it makes sense to get a different airline rewards card, Meyer says. For example, moving from Atlanta and keeping your Delta card could work, but moving from New York and keeping your JetBlue card might not.

One option is to switch to a card that offers more flexibility, Cothern says. For example, the Chase Sapphire Preferred card allows you to transfer points to many different partner airlines, so it won't matter if you move again.

“It gives you lots of different options,” he says.

3. Your lifestyle changes.

Maybe you had a job that required lots of travel, and it helped you rack up points through your airline rewards card. But what if you change jobs, have a kid or just become more of a homebody? In some cases, a lifestyle change can be a good reason to re-evaluate your rewards card, Meyer says.

It could, for example, make sense to switch out that airline rewards card for one that gives you a higher percentage of cash back when you buy groceries and gas.

“It totally depends on your situation,” Cothern says.

4. You find that the annual fee is higher than the value of your rewards.

Most rewards cards charge annual fees of $50 to $100 or more. Paying the fee might work out well if you're a big spender who accumulates lots of points or miles, Meyer says. Just crunch the numbers to see the value of the rewards you earn each year and how that stacks up to the fee.

If your annual fee cancels out your rewards, you have several options. First, you can call the credit card company to ask if they'll waive the fee.

“Some will and some will not,” Cothern says.

Or, some credit card companies will allow you to switch to a non-rewards card with no annual fee. Finally, you could shop around for a rewards card with no annual fee, Meyer suggests.

“That way, if you're a casual user, you won't be shelling out $100 a year,” Meyer says.

One other factor to consider: the value of the perks. For example, Jeremy Jones, a travel blogger at Living The Dream, says the benefits he gets are worth more than the $95 annual fees he pays on two cards. One card gives him free checked bags and airport lounge passes, while another gives him gold status at a major hotel chain, with free breakfasts, free Internet and automatic room upgrades.

5. Points are expiring.

If you suddenly realize your points or miles are about to expire, it could be a sign that you're not using your rewards card enough. Rewards cards generally have pretty lenient terms about keeping your points active. If your points are expiring, it's a sign you haven't used your card in a long time.

When you get a rewards card, plan exactly how and when you'll use your miles or points, Cothern says.

“Don't save and hoard points just because,” he says.

Different cards have different rules about when, if ever, points or miles expire, so know the rules for your card. If you're not using your rewards, consider switching to a card that has rewards you would be more likely to redeem, such as simple cash back, Meyer says.

6. Your card has changed.

Card issuers and frequent flier programs sometimes change the way their programs work. For example, Cothern points to Southwest's recent announcement that it will require fliers to redeem 70 points per dollar for a Wanna Get Away fare, up from 60 points. That reduces the value Southwest cardholders receive, he says.

Card issuers and frequent flier programs will notify you of changes in rewards programs, so read everything you receive in the mail and scour your statements for fine-print notices. And if your card devalues points or makes other unfavorable changes? “It might make sense to switch cards,” Cothern says.

7. You have to jump through too many hoops.

Maybe you have a card with changing rewards categories and you're tired of trying to keep track of how it works. Some consumers enjoy the challenge of this type of card, Meyer says.

“They might say, 'OK, next month is groceries and we're going to buy enough Tide and toilet paper to take us into the next century,'” Meyer says.

But that doesn't work for everyone.

“It can drive some consumers crazy trying to remember, 'Is this month groceries or is it gasoline?'” he says.

If you fall into that camp, you might want to look for a card that doesn't make you work so hard.

“There are a lot of programs out there that are more straightforward,” Meyer says.

One possibility: If you buy a lot of food or have a long commute to work, Cothern recommends considering a card like the Blue Cash Preferred Card from American Express, which has a consistent 6 percent cash-back rate on groceries up to $6,000 a year and 3 percent cash-back for gas stations and department stores.

The bottom line: It makes sense rewards card holders to regularly evaluate what they're getting from their rewards card, compare it to what they're paying (in time, interest and fees) versus what they're getting, and make a change, if necessary.