Finance

Think Your Credit Card Rewards Are Safe? Banks Count on You Forgetting (Trap 4)

April 14, 2025
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Note: This is part of our series on credit card rewards traps. Check the end of this article for links to more pitfalls.

So, you’ve navigated rotating categories like a pro?

Confused by Complex Credit Card Rewards? That’s Exactly What Banks Want (Trap 3)

Excellent—but don’t relax just yet. Let’s talk about “breakage”—the art banks have perfected to ensure your hard-earned rewards remain unredeemed. It’s sneaky, it’s subtle, and it’s stealing your perks right under your nose.

This trap is a bit of a silent killer. You might be diligently earning points or cash back, but if you never actually redeem them, it’s like running on a hamster wheel. Issuers are motivated to make redemption just slightly difficult or delayed, because unredeemed rewards (known as “breakage”) = pure profit for them. Every point or dollar of cash back you don’t use is one less dollar the bank pays out.

How it works:

There are a few ways this manifests. One, some programs require you to accumulate a minimum amount (say $25 or $50) of cash back before you can cash out. If you close the card or stop using it before hitting that threshold, tough luck – the issuer keeps the rewards. Two, not all cards auto-redeem your rewards; you might have to log in and manually request the cash back or transfer points to an airline. It’s easy to forget or procrastinate, especially if the amount is small. Three, banks sometimes set up redemption options that are less than straightforward – like needing to redeem through a special portal or only as statement credits for certain purchases. This extra friction means some people won’t bother. Additionally, customer service or tech glitches can throw up hurdles. The CFPB highlighted cases where cardholders had to call dozens of times or wait months to get issues resolved when points didn’t redeem correctly . Not everyone has the persistence to fight that hard, so they give up – and the bank quietly pockets those points.

Hard to spot?

Definitely. No one signs up for a rewards card thinking, “I might not get around to redeeming these.” But it happens a lot. According to one survey, nearly 70% of rewards cardholders are sitting on unused rewards (cash back, points, or miles) right now . And 40% haven’t redeemed any rewards in the past year . That’s millions of people leaving free money on the table. Why? The reasons vary: some are “saving” points for a big redemption (risky, as we’ll discuss in the next trap), others just forget or feel the process is too cumbersome. Some folks don’t even realize their rewards are there – out of sight, out of mind. Issuers often aren’t in a hurry to remind you either. They may send an occasional email about your balance, but they won’t beg you to redeem (unless maybe you’re at risk of expiration). In fact, they count on a portion of rewards never being claimed. It’s baked into their financial models.

Sometimes, even when you try to redeem, you encounter issues: perhaps the airline seat you want to book with miles isn’t available, or the gift card you want is out of stock, or the cash-back website is strangely error-prone. A particularly egregious example: a Barclays cardholder complained that nearly $15,000 worth of points vanished when the bank closed their account, and customer service initially said they couldn’t restore them – which turned out to be false . Only after a fight did the bank reinstate those rewards. Imagine if that cardholder hadn’t noticed or pushed back – those $15k worth of points would have been free money for the issuer.

Who’s affected:

Everyone, to some extent, but especially those who are not vigilant about their accounts. Low-income users might actually redeem cash back quickly (since every dollar counts, they’re on top of it), whereas higher-income cardholders might accumulate a ton of points and not bother using them promptly. I’ve seen frequent flyer enthusiasts hoard miles dreaming of a first-class trip, only to find out later half their miles expired or the award seats require twice as many miles now (we’ll get to devaluation next). Retirees who aren’t checking online accounts regularly can easily let points lapse. Even tech-savvy millennials can get lazy – “I’ll cash out later” is a common refrain. The empathy here is that life is busy and reward programs can be a low priority. But trust me, set a reminder to redeem your rewards periodically. It can be as simple as cashing out to a bank account or grabbing a gift card for a retailer you use. Otherwise, you’re gifting your loyalty rewards back to the credit card company’s bottom line – and they’ll happily accept the donation.

Want to stay a step ahead? Discover even more hidden reward traps down below.