Feds Say Credit Card Fees May Outweigh Perks

Feds Say Credit Card Fees May Outweigh Perks

Biden administration officials are questioning credit card loyalty programs that influence millions of people's purchasing decisions.
(Photo : by Joe Raedle/Getty Images)

Biden administration officials are questioning credit card loyalty programs that influence millions of people's purchasing decisions. They claim that credit card members may be paying more in fees and interest than their travel rewards and other benefits are worth.

Representatives from airlines, financial institutions, unions, and consumer advocacy organizations attended a joint session organized by the Department of Transportation and the Consumer Financial Protection Bureau on Thursday in Washington to examine whether additional restrictions are necessary.

Regulatory Investigation into Credit Card Rewards and Travel Benefits

Authorities are investigating the claims about sign-up incentives, point value modifications, barriers to point redemption, and reward forfeiture upon card closure. They pay particular attention to travel benefits, such as those provided by credit cards with airline names, which enable holders to accrue frequent flyer miles. Per a NerdWallet poll last year, 41% of Americans had credit cards for travel rewards.

The White House is cracking down on "junk fees" and other pricing practices, especially in the financial services and aviation industries, which it believes unjustly squeeze consumers and drive inflation. This includes increased examination of credit card benefits.

The industry quickly objected when the CFPB reduced credit card issuers' late fees in March. Two weeks ago, the Transportation Department said it would force airlines to promptly return passengers' money if their flights are canceled or significantly delayed.

With jurisdiction over financial institutions, the CFPB has taken tough measures against banks offering credit card sign-up incentives. In July of last year, it ruled that Bank of America had to pay over $100 million for actions that included depriving or withholding bonus points from tens of thousands of customers.

Additionally, federal officials are increasingly scrutinizing airline credit cards more thoroughly. They can be far more expensive than the usual credit card, which often has no annual fees and has relatively lower rates, averaging 24.7%, with annual fees as high as $650 and average interest rates of 25.3%, according to LendingTree.

Read also:Creative Ways to Pay Down Credit Card Debt and Boost Savings

Credit Card Rewards and Customer Dissatisfaction:

Customers have expressed dissatisfaction with the limitations on using their accumulated points, even when they are able to make on-time bill payments and avoid paying interest.

There is "fierce competition" in the airline industry for credit card loyalty, according to a coalition representing the biggest airlines in the country, Airlines for America, which stated on Thursday. It further stated that "consumers have the power of choice when picking a carrier for air travel or a credit card for spending, with a wide range of options, to pick what best fits their needs."

Credit unions, community banks, and payment card networks are represented by the Electronic Payments Coalition, which cites CFPB statistics demonstrating that the average value of rewards points per dollar spent increased from 1.4 cents in 2019 to 1.6 cents in 2022. The association called the authorities' investigation into credit card incentives "politically motivated" in a statement released on Thursday.

Related article:Credit Score Danger Zone! Rising Missed Payments Threaten Your Borrowing Power

The content provided on is for informational purposes only and is not intended as financial advice. Please consult with a professional financial advisor before making any investment decisions.

Real Time Analytics