Don't let card issuer's changes throw you for a loop


When you apply for a credit card, you often look at its rewards, interest rate and annual fee, among other factors. But sometimes issuers throw a curveball and change card terms, including travel benefits, cashback amounts, mile expiration dates and more, meaning the card that suits your needs now might not be such a dream down the line. 

You usually don't have a say in changes to your card agreement, but you can prepare for them. Here are five common ways your issuer can throw a wrench in your card agreement:

1. Rewards program changes.
When you earn rewards on everyday spending with your credit cards, it's a win-win situation. You're (hopefully) not spending any extra, and you're earning cashback or points.

However, you may earn 3 per cent cashback on gas and groceries at first, but your bank could lower - or increase - that rewards rate at any time.

Banks also can make it more difficult to redeem rewards. For example, they can raise the number of points needed to earn a reward, essentially devaluing your points.

How to prepare: "There's nothing you can really do to stop it, but you may not want to stockpile a ton of points for many years, as your points can suddenly lose their value," Jason Heath, managing director at Objective Financial Partners, said in an emailed response to questions.

2. Expiring miles.
Miles can carry expiration dates; use them or lose them, as they say. For example, Air Miles caught a lot of flak in 2016 when parent company Loyalty One's policy on expiring miles became public.

Under Air Miles' updated policy, quietly introduced many years ago, unredeemed miles older than five years would start expiring beginning January 1, 2017. Due to cardholder backlash, Air Miles backed away on its expiring miles policy.

Aeroplan tried instituting a similar expiring policy a few years ago, and it backed down as well.

How to prepare: Ontario is now introducing legislation to ban the expiration of credit card reward points. Other provinces in Canada are expected to follow.

"I'm happy that provincial governments are seeking to prevent air miles from expiring," said Heath. "It's only fair to the consumer. I hope to see more government regulation of the financial industry in the future. Consumers shouldn't have to read all the fine print to avoid being duped."

Until then, you should read the fine print of any updated card agreements, and don't be afraid to ask your issuer if you have trouble understanding the details. It's best to know what's going on with your rewards at all times to avoid a nasty surprise.

And to be on the safe side, don't sit on a mountain of miles. If they might one day expire, use some of them.

3. Added or extended blackout dates.
Travel rewards programs let you book your flight with points without paying anything except the airline fees and taxes. Problems arise, though, when travel reward programs introduce blackout dates, during which cardholders cannot redeem their rewards.

How to prepare: If you want to travel during peak times, such as holidays, ask about blackout dates before you apply for a credit card. If the blackout dates change, your only option is to book a flight at a less busy time or switch to a new credit card with different (or no) blackout dates.

It's best to be prepared for blackout dates at any time, and don't rely on your points for travel during the busiest times of the year.

4. Changed fees and penalties.
You can pay fees for missing a payment, shopping in a foreign country (or on a foreign website) or even not using your card. These fees and penalties can change at any time. All your credit card has to do is inform you in writing by sending you a copy of the revised cardholder agreement.

How to prepare: Be sure to stay informed of new fees and how they could affect you. Always read those updated card agreements that come in the mail or your email.

Often, the changes won't have any impact.

For example, if your credit card issuer increases the fee for paying your bill late, always pay your bill on time and you'll never have to worry about a late fee. Similarly, if your interest rate goes up and you never carry a balance, again no worries.

If a change will affect you, budget accordingly. Your budget should be a dynamic thing. You should be revisiting it every few months, so be sure to factor in any updated card fees.

5. A new minimum payment.
Many cardholders assume the minimum payment is set in stone, but that's not necessarily the case.

If you're carrying a balance on your credit card, many banks calculate your minimum balance as either 3 per cent or your outstanding balance or $10, whichever is greater. For example, if you had an outstanding balance of $3,000, your minimum payment would be $90, since 3 per cent ($90) is greater than $10.

How to prepare: The easiest way to avoid worrying about the minimum payment is to pay off your balance in full each month. If you're carrying a balance, though, pay special attention to your credit card statement and any changes to the cardholder agreement, so you're not caught off guard.

"The minimum payment is what often gets people into trouble. The law of compound interest also works against you in this scenario," Seun Adeyemi, senior financial planner at SA Capital, said in an emailed response to questions.

Your card agreement is fluid
These five common updates to your card's terms are only a few of the ways your card agreement can change. Your issuer should keep you abreast of any updates made to your agreement, but it doesn't always have to tell you in writing.

Do your research, read your agreement thoroughly and don't be afraid to call customer service and talk with someone who can explain what's going on with your card. That way, you're less likely to lose rewards, get hit with higher fees or face any other unpleasant surprises.

See related: Your options if your issuer changes your agreement, Why issuers close credit card accounts, How to fight credit card inactivity fees
Published February 16, 2017

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