Credit Card Rewards Are Changing, and the Pandemic Accelerated It. Here’s How You Can Benefit

Photo to accompany story about credit card rewards. Getty Images

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If nothing else, 2020 has proved just how quickly things can change. 

Your budget, for instance, which used to include weekend getaways and concerts or theater, may now be pared down to essential, everyday items. Just as our lives have changed this year, so has the way we use our credit cards.

For example, take that co-branded airline credit card you opened last year for its travel benefits and lounge access. Its value might draw new scrutiny when it’s time to pay the annual fee but you haven’t been on a plane in months. 

Or maybe you opened a card with great rewards on entertainment like movie and concert tickets, and are now left wondering when you’ll get to actually earn those rewards amid ongoing event cancellations. 

While this year has forced a shift in how some cardholders use and gain value from credit cards, it doesn’t mean your rewards cards are now useless. As our spending habits evolved over the past months, issuers responded in turn. 

Many of these changes bring more value than ever to regular, everyday spending, a benefit for rewards pros as well as those who historically haven’t put much thought into credit card rewards. 

“A lot has changed,” says Ted Rossman, industry analyst at CreditCards.com. “You should reevaluate what cards you have, how you’re spending, and what you want to get out of that card.” 

A New Era for Credit Card Benefits

A few years ago, it wasn’t uncommon for credit card companies to pull in new users with eye-popping sign-up bonuses worth hundreds (if not thousands) in points value. But for a while now, credit card issuers have shifted away from bonuses and upfront benefits in favor of long-term, ongoing rewards.

“Even before the pandemic, we saw credit card companies take steps to make it harder to earn welcome bonuses and other benefits,” says Chris Dong, who reports on credit card benefits and points & miles for The Points Guy, which shares a parent company with NextAdvisor.

He points to Chase’s rumored 5/24 rule, which (unofficially) prevents anyone who has opened five or more credit cards in the past 24 months from being approved for a new Chase card, as well as Amex’s once-per-lifetime restriction when it comes to earning welcome bonuses on new cards.

While the evolution didn’t begin when COVID-19 hit the U.S. early this year, it may have accelerated the trend. 

Spending During a Pandemic

On one hand, issuers have tightened lending standards for new applicants across the board and even pulled some cards off the market altogether. But many have also increased efforts to keep current cardholders (and keep them spending), rolling out a host of benefits tailored to pandemic-era everyday purchases.

“When the pandemic first began, we saw issuers get really aggressive about leaning into this ‘new normal,’ Rossman says. Many realized early on that travel was no longer a priority, and many cardholders would soon become wary about paying travel card annual fees without reaping the benefits, he says. 

“You’re worried about your job, you’re worried about your finances, and begin thinking ‘Why am I paying this annual fee for a card I’m not using?’”

Increasingly, card issuers pivoted to meet cardholders where they are.

Short-Term Fixes

Early in the pandemic, some issuers reacted quickly, introducing new rewards on the purchases consumers were making at home. 

American Express, for instance, reacted early with limited-time offers (through December), introducing streaming credits and adding dining and grocery benefits to co-branded travel cards. Chase, too, rolled out temporary bonuses on groceries (through July; later adding gas stations and streaming services through September) to its Sapphire and co-branded travel cards.

Other issuers — including Citi, Bank of America, Capital One, and Wells Fargo — have all instituted temporary everyday spending benefits to their travel rewards cards, many of which remain valid through 2020 or early 2021.

But as these benefits begin to expire, Rossman says, “The real question moving forward is what happens now?”

Looking Ahead: Pandemic and Beyond

Both pre-pandemic changes and shifting rewards over the past few months indicate issuers are focused on customer retention. In an ever-expanding market, high-value rewards encourage cardholders to keep accounts open long-term rather than score big bonuses early on, only to close the account a few months later.

We reached out to a few major  credit card issuers — Capital One, Chase, American Express, and Discover — for comment on how they predict rewards and other cardholder benefits will continue to evolve, and each responded with a single common priority: flexibility.

Pro Tip

Keep up with changes issuers make regularly to ensure the rewards you’re earning best align with the categories you spend on most.

Everyday spending benefits are a major part of this, but not the only way issuers are looking to add long-term value. Here are a few things you should look out for both now and in the future: 

Redemption Flexibility

Beyond earning rewards, rethinking how cardholders redeem rewards has influenced issuers’ responses to the pandemic. 

As early as April, for instance, Capital One added options allowing its travel cardholders to redeem miles for purchases on takeout, delivery, and streaming, extending the option multiple times since. More recently, Chase unveiled its Pay Yourself Back program, allowing Sapphire cardholders to redeem points at the increased rate they normally would receive on travel redemptions for statement credits to offset grocery, dining, and home improvement purchases.

Dong and Rossman both predict redemption flexibility will play a significant role in how issuers de-center travel rewards in favor of everyday benefits, even when regular travel returns. 

Return to Travel

The future of travel is very much still up in the air, but issuers aren’t abandoning travel rewards or partnerships with airlines and hotels. 

“I would love to see all the travel rewards come back, and I think to some extent they will,” Dong says. “But I think the issuers are going to be more prepared and more focused on more permanent benefits that aren’t as travel-focused.”

Redemption could play a prominent role in finding a long-term, sustainable balance between travel and everyday purchases. “Even if you redeem for travel, I think we’ll see more of earning those points and miles through everyday spending,” Rossman predicts. 

The shift may be subtle, but can have a big impact on your budget. Before, spending on flights or hotels was the best way to maximize points earned which you could redeem for more travel, under many cards’ rewards structures. Now, he says, “I think we’ll see more of the spend on streaming to get travel or spend on groceries to get travel.”

Partnerships

Also expect to see more cardholder benefits that leverage partnerships with outside brands for everyday rewards, even on non-co-branded cards. This could look like use-it-or-lose-it offers, free trials, cardholders discounts, and more.

With any of the Chase Freedom or Sapphire cards, for instance, you can save on Lyft (through March 2022) and Doordash (through 2021) via Chase’s partnerships. Cardholders who have The Platinum Card® from American Express have a twice-a-year credit built in for spending with Saks 5th Avenue, while those with the American Express® Gold Card enjoy monthly credits with Grubhub and Shake Shack, among others. Capital One, too, has partnered with UberEats (through January 2021) for cardholder discounts on delivery.

Dong predicts these partnerships will only become more prominent in the coming months. “It’s more leverage for them, but less risk involved,” he says. “I think that’s the future of a lot of credit card rewards.”

Maximize Your Everyday Rewards

Credit card issuers are constantly reevaluating how they can add the most value to their cardholders’ wallets, and if you strategize and pay your balances down each month, you can save hundreds of dollars each year. But it’s your responsibility to stay on top of your own spending and which rewards can help you maximize the purchases you spend on most.

“The onus falls on us as the consumer to make sure we’re utilizing the right cards — the cards that optimize our spending,” says Priya Malani, financial planner and founding partner of Stash Wealth.

Determine Your Biggest Spending Categories

Look at past credit card or bank statements and comb through any receipts in the bottom of your bag to figure out where your money is really going each month. 

“You want to think of your credit card as a smarter way to use the money you already have,” Malani says. “Everyday spending” categories aren’t going to look the same for everyone. This can help you narrow down the ones most beneficial for you.

For instance, if you don’t have a car, you probably won’t benefit from cash back at gas stations. If you meal prep and eat out infrequently, you’ll likely want to focus on grocery rewards over dining and restaurants.

Improve Your Credit

Another lasting effect of the pandemic is issuers’ reluctance to approve applicants that aren’t among the strongest credit profiles. If you’re looking for great rewards, it’s more important than ever to ensure your credit is healthy.

“The bar has been raised,” Rossman says. “What constitutes really great credit has changed. Seven or eight months ago, you probably could have gotten most credit cards with a credit score of 670. Nowadays, you’re looking definitely at 700, I would even say 740 or 760 to be really confident about being approved.