3 Reasons an Issuer May Claw Back Your Sign-up Bonus
by Brittney Myers | Updated July 21, 2021 - First published on April 26, 2021
Avoid these mistakes to keep their claws off your bonus.
The credit card industry is home to many regulations that protect you against things like rate hikes and excessive fees. But there are very few rules governing your credit card rewards. In fact, the terms and conditions of many rewards programs make it clear that issuers can do more or less whatever they want.
For example, issuers have complete control over the type of rewards you earn, how you earn them, and what you can do with them. If an issuer wants to change their entire rewards program on a whim, they have every right to do so.
Similarly, that blanket control can even extend to taking back your rewards any time they want -- and they have. American Express, in particular, is known to claw back welcome bonus rewards from cardholders who break the rules or abuse their policies. Here's a look at a few reasons your issuer may take back your credit card rewards.
1. You returned purchases
The most common reason folks lose their credit card rewards is because of returns. Anytime you return a purchase and get a refund, the issuer may revoke the rewards you earned on that purchase.
This can also apply to your sign-up bonus. Specifically, it can occur when you return something you purchased while working on your spending requirement. If the refund from that return drops you below the spending requirement, the issuer will likely call foul and take back your bonus.
If you've already used up your bonus rewards, you could actually wind up with a negative rewards balance. Any new rewards you earn will go towards paying your deficit until you're back to zero.
2. You canceled your card too early
While there were a few years when you could churn -- apply, get your bonus, then cancel -- credit cards at will, issuers have worked hard to curb churning. Along that vein, several issuers are quick to claw back sign-up bonuses if they even suspect you're looking to churn their cards.
One thing that may hit an issuer's churning radar is closing your card right after earning your bonus rewards. Cancel too soon, and the issuer may revoke your bonus on your way out. Some issuers take it even further, taking back your welcome bonus if you cancel your new card within the first year.
If you're thinking of canceling a card account you opened within the last 12 months, make sure you know the exact date you opened the account. Since most issuers will refund or prorate your annual fee, you can wait a few weeks past your anniversary date to be sure you're past the one-year mark.
3. You broke the issuer's rules
Another surefire way to lose your credit card rewards is to violate the issuers rules. Any rewards earned from purchases that go against the terms and conditions can be taken back.
For instance, manufactured spending is when you make excessive cash-equivalent purchases, such as buying money orders. When you do this to meet your sign-up bonus, expect the issuer to claw it back -- potentially before it even hits your account in the first place.
Excessive issues could get your account closed
Unfortunately, having your sign-up bonus or purchase rewards revoked may not be your only problem if you abuse the system. If your behavior violates too many rules or the issuer sees a pattern of misuse, you could lose your entire account. Any suspected credit card fraud can also lead to a closed account and lost rewards.
While this may seem dire, the average cardholder doesn't have to worry about losing their rewards -- or their accounts. Normal, everyday use of your credit card shouldn't violate issuer rules. And if you're at all concerned that a specific purchase may not be allowed, you can always reach out to the issuer ahead of time to double check.
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