Photo : Shutterstock

Rewards credit cards are adapting to the coronavirus by offering extended windows for earning sign-up bonuses and by pivoting rewards away from travel.

Advertisement

But when the economy recovers—however slowly—from the shock of the pandemic, don’t expect your credit cards to return to the way things were right away. Just like every other aspect of your life, there will be a “new normal” for credit cards—and if you remember the financial crash of 2008, some of the long-range effects of the coronavirus may look familiar.

The more covetable your card is, the more likely you are to see major changes, according to the experts we asked.

Advertisement

That’s because those high-end cards claim to offer a lot of value in exchange for their pricy annual fees, putting them under pressure to deliver.

“These credit card issuers are trying to figure out ways to incentivize people to continue spending...so they can feel that the credit card is a justified purchase at a premium of [about] $500 a year,” said Brett Holzhauer, travel rewards expert at ValuePenguin.

Here are some potential changes to look out for in the next few months.

Lifestyle rewards may stick around

Holzhauer predicts lifestyle benefits like earning points for grocery shopping and ordering takeout, or discounts on streaming services could stick around beyond the pandemic if they resonate with consumers.

Advertisement

But don’t expect all your pandemic-era perks to hang around forever.

“The new reward categories feel a bit like letting the genie out of the bottle. It’s a fundamental change to the card’s perks and I have to wonder if cardholders are going to get a little too used to those rewards. What’s going to happen when those rewards go away?” asked Steven Dashiell, credit cards expert at Finder. He suspects a few of the recent additions and concessions issuers added to their cards will be available for a short period after the economy starts to recover.

Advertisement

But it’s worth noting that some of the more lifestyle-focused perks beyond travel or straight-up points-earning ability started to appear well before coronavirus was on our minds, like DoorDash and Lyft membership access for some Chase customers and Uber credits for some American Express cardholders.

Travel rewards may lose their luster

Speaking of those lifestyle perks that focus less on travel, Holzhauer emphasized that travel cards aren’t the only way to get value from a credit card. You might find that a cash-back card is a better fit for you.

Advertisement

“A lot of people in the points and miles space have looked down on cash-back cards, but I don’t think they’re a bad option at all,” he said. You may not be able to travel for free on your earnings, but you’ll have consistency and a potentially greater sense of satisfaction that you’re “getting” something in return for your card use.

Advertisement

“This is going to weed out the hardcore travelers from the people who take one or two trips a year,” Holzhauer said. While he and his wife, who travel full-time, know they’ll use their earnings later on, travel will be completely off the table for many credit cardholders for potentially years to come.



“This is a good time to look at your strategy and say, ‘is this card really giving me the best value’?” he said

Advertisement

Cash-back card issuers will surely be ready for consumers who want to switch from a travel-focused card to a cash-back card, so keep your eyes peeled if you’re thinking about changing things up.

Expect big signup bonuses, but brace for the downside

While the leash on new credit may be short now, when the economy starts to rebound, card issuers will be ready to entice new customers with huge signup bonus offers, Holzhauer explained.

Advertisement

“Consumers need to know that these bonuses are going to be big and they’re going to come in swinging,” he said

But the trouble with credit card rewards is that they’re totally made up.

There’s no standard for what your points or miles are worth and what it takes to earn a free flight or hotel stay. And airlines and hotel chains can sell those points for whatever price they choose.

Advertisement

But that means that in difficult times, you could hit a bit of a jackpot—at least, for a little while.

Quick trip down memory lane: After the last financial crash, airlines sold a ton of miles to credit card issuers at dirt-cheap bulk rates. It helped both parties: airlines wanted to fill planes with travelers and credit card issuers wanted to attract and retain customers.

Advertisement

The only problem? If you print more miles, they’re not worth as much, Holzhauer explained. Rewards partners can devalue them at any time.

It’s like if a hotel chain sold out a bunch of points, but then decided the hotel —which used to cost you 30,000 points per night–is going to now cost you 150,000 per night. You might have the points in your account, but do you want to use them all for one night?

Advertisement

The same scenario that occurred 10 years ago is likely to happen again. Dave Grossman, a loyalty program consultant and founder of MilesTalk, pointed out that Hilton sold $1 billion worth of points to American Express in April and Marriott sold $920 million of points to Chase and American Express in early May. “In mid-April both United and Delta were said to be mulling similar sales,” he said.

“I would expect spending bonuses for existing cardholders near-term, and increased signup bonuses in the longer-term,” Grossman said.

Advertisement

That lingering fear that your points will lose value over time is a big reason Grossman recommends cards that allow you to transfer your points or miles to a variety of travel partners, so you can get the best deal when it’s time to book. And it’s why we encourage an “earn-and-burn” rewards philosophy here at Lifehacker.

Advertisement

But if traveling isn’t an open for at least the next few months, you could find yourself holding onto those points and needing to leave their value up to chance.

Source: Lifehacker.com

Powered by NewsAPI.org