Legislation offers challenges for consumers seeking rewards

What may have been good news for their credit accounts also triggered a series of new challenges for consumers. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 made it increasingly difficult for lenders to ramp up rates, requiring that they give customers at least 45 days' notice before increasing any interest rates, terms and penalties. An array of provisions to take effect this summer will also eliminate overdraft fees incurred when consumers overextend their account, and require credit card companies to review any loan or rate increases established since January 1, 2009. That is the good news. What banks are doing in response to lost revenue from this legislation may make it difficult for consumers to use credit cards effectively. Some lenders have introduced annual fees, while others are cutting back on reward programs. These rewards cost lenders more than $15 billion last year, according to a recent report by SmartMoney.com. "Banks can't afford to give rewards away anymore," Robert Hammer, an industry consultant, was quoted as saying. Cash-back options are becoming more attractive as point-to-price conversions increasingly work against the favor of the customer. This is the case at California Pizza Kitchen, which offers $50 gift cards in exchange for 6,000 points, and can often be seen in airline ticket sales, according to the report. Consumers should take advantage of these cash-back programs now, before lenders eliminate them. But this does not mean that all options are lost. Many companies are rewarding customers for their loyalty by maintaining reward programs and introducing new ones. American Express Company recently launched a program to reward customers who participate in volunteer service. Participants in the 2010 Member Project will receive 500 bonus points for every volunteer hour logged. Citibank and JP Morgan Chase & Co. also increased the number of miles rewarded per dollar spent, according to a recent article by CNNMoney.com. Consumers hoping to cash in on their credit card use should look for a program suitable to their spending habits. Rewards that offer reimbursements for lost luggage may work for frequent travelers. "And for big spenders who love perks, there is one place rewards aren't being cut: exclusive cards issued to affluent households with good credit," the SmartMoney.com report said. Individuals with strong credit scores and reports often indicate a smaller risk to lenders, meaning they are more likely to remain current on their payments and less prone toward charge-offs, which can be very expensive for financial institutions.