Consumer watchdog warns companies against devaluing credit card rewards, launches tool to avoid scams

A federal consumer watchdog is warning that certain credit card companies may be illegally devaluing accrued rewards such as points or airline miles. 

The Consumer Financial Protection Bureau (CFPB) said Wednesday that companies may violate federal law if fine print disclaimers or vague terms buried in a contract conflict with promotional language, if companies deflate the value of a customer’s accrued awards, or if system failures result in consumers losing points when attempting to redeem them. 

"Large credit card issuers too often play a shell game to lure people into high-cost cards, boosting their own profits while denying consumers the rewards they’ve earned," CFPB Director Rohit Chopra said in a statement. "When credit card issuers promise cashback bonuses or free round-trip airfares, they should actually deliver them."

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The CFPB said it's taking aim at these so-called "bait-and-switch tactics." 

It launched a tool to help consumers, who choose to open or use a credit card based on both clear and subtle messages about the value of card benefits and rewards, to find the best credit card rates for both rewards cards and traditional cards.

The tool, Explore Credit Cards, allows consumers to compare more than 500 credit cards using unbiased, comprehensive data, according to the federal watchdog.  

Despite the significant rate differences between issuers serving similar customers, the CFPB says it's not easy for someone to compare interest rates before applying.

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The tool essentially provides an "apples-to-apples" comparison of options in the credit card market using data that's available to the public. 

The CFPB said the tool "provides unbiased, comprehensive data" for more than 500 cards. It lets customers evaluate them based on credit score range, interest rates, fees and rewards offerings. 

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The CFPB also said the tool is meant to make the credit card market more competitive, allowing smaller providers and companies with better offers a chance to compete.