Travis Pham
Associate Editor
Loyola University Chicago School of Law, JD 2027
Credit card companies have turned rewards and bonuses into flashy marketing showpieces, from generous signup points to promises of skipping airport lines. Yet behind the glossy offers lies a harsher reality in which many cardholders end up paying far more in interest, fees, and forfeited value than they ever receive in rewards. This imbalance raises serious questions about transparency, compliance, and consumer harm.
The rise of rewards-focused marketing
Credit card companies are well aware that the more customers they attract by signing up for credit cards, the higher their revenue will be from interest and fees they collect from those customers. Rewards programs have become central to how credit cards are sold. The Consumer Financial Protection Bureau (CFPB)’s May 2024 Issue Spotlight reports that rewards are now offered on the vast majority of general-purpose cards, and card issuers increasingly compete on rewards rather than low rates.
However, this shift has side effects. According to the CFPB, in 2023 the agency received over 1,200 complaints about credit card rewards programs, more than a 70% jump compared to the pre-pandemic period. A revealing statistic is that many consumers carry a balance month to month, and when they do, they often pay significantly more in interest and fees than they receive in rewards value. All of this suggests that there is an imbalance, where issuers want to attract customers with “sweet” rewards deals, but those deals often mask underlying cost structures and hidden constraints.
When promised rewards don’t materialize
Compliance and consumer protection concerns often emerge when promised rewards are not delivered, leading to widespread consumer frustration. In its May Issue, the CFPB highlighted four recurring complaint categories reflecting these consumer experiences. First, unexpected promotional conditions arise when consumers apply for a card based on a headline offer (such as “earn $500 bonus”) only to discover that the terms make the bonus extremely difficult to attain. Second, devaluation of rewards occurs when issuers, or their partner merchants, unilaterally change point valuations, require more points for the same redemption, or reduce the value of co-brand benefits. Third, redeeming obstacles and technical issues often prevent users from accessing promised rewards, whether through lost points, conversion errors, or confusing customer service systems. Finally, revocation or expiration of rewards, sometimes due to sudden account closures or undisclosed expiration policies, fuels additional frustration. The CFPB suggests that these practices can resemble a bait-and-switch tactic; advertising generous rewards upfront and then quietly layering restrictions or revoking benefits after the fact.
Regulatory pressure and compliance expectations
In response to growing consumer complaints and industry trends, the CFPB issued Circular 2024-07 (Circular), explicitly warning that credit card issuers and their service providers may violate the Consumer Financial Protection Act (CFPA) if they engage in “unfair, deceptive, or abusive acts or practices” (UDAAP) related to rewards programs. Circular highlights several examples of potentially unlawful conduct, including devaluing rewards that consumers have already earned, revoking rewards based on vague conditions, deducting points without delivering the promised benefit, and relying on fine print disclaimers that contradict promotional language. Beyond rewards, the CFPB’s broader regulatory agenda also targets interest rate disclosures, fees, and clear pricing structures in credit card products. Meanwhile, state legislatures are developing their own consumer protections, such as New York’s General Business Law § 520-e, which requires advance notice before major changes to rewards programs and a grace period for consumers to redeem under existing terms.
Even with these emerging guardrails, compliance gaps remain. Key fault lines include inconsistent disclosure and misleading marketing, where rewards dominate advertising while APRs and fees are buried in fine print despite Schumer box disclosure requirements. Circular also notes that while unfair practices are strictly prohibited, “materialization” of such unfair practices exists in a gray area that credit card companies often exploit through the design, marketing, and administration of rewards programs. For example, a program may violate UDAAP when they materially reduces the overall value of the rewards consumers have already earned or purchased. Yet companies frequently use tactics to circumvent the issue, such as dynamic pricing for reward redemption or limiting redemption options with travel partners. These strategies make it challenging to investigate complex rewards programs, especially when changes are made frequently.
Building trust in the credit market
Several proposals have been suggested to reduce consumer harm and build trust in the credit market. One approach is to standardize “safe harbor” terms, where the CFPB or Congress could define baseline protections, such as minimum notice before devaluation, prohibitions on revoking previously earned points, or mandatory redemption windows as described in Circular. Another proposal is to require clear, upfront cost comparisons, showing how rewards stack up against interest and fees for typical revolving balances, which could soften the reward-focused narrative. Similarly, greater transparency in co-brand agreements would ensure card issuers explicitly reserve rights and obligations to protect cardholders when partner programs change, allocating responsibility for potential customer harm. Finally, consumer education and simpler disclosures that include simplified summaries or visual scales highlighting worst-case costs (for example, “You may pay 3x more in interest than you’ll earn in rewards”), could empower consumers to make more informed choices, according to a 2008 UPenn Law Review article, Making Credit Safer. The underlying idea is simple: an informed consumer is a smart consumer.
Final thoughts
Credit card rewards are powerful marketing tools, and they can offer real value for some consumers. But when the flashy promises of marketing don’t match the actual benefits, it creates gaps that draw regulatory scrutiny and consumer distrust. The CFPB’s recent spotlight and Circular suggest that the era of confusing rewards practices may be coming to an end, or at least under much closer watch. Now is the time for credit card issuers to reassess reward design, promotional messaging, and fairness in redemptions. For consumers, these offers should prompt them to ask what the real cost is of signing up.