New York Senate Passes Law To Prevent Banks From Keeping Your Points When Closing An Account

If you have an American AAdvantage account or a United MileagePlus account and cancel your co-brand credit card, you still miles in your American or United account. However if you cancel a bank rewards card, that’s akin to cancelling the account that holds the points. You’re going to lose your points.

  • Generally if you have more than one card with a bank, you can pool all of your points into a single account (American Express does this automatically). So losing your points is only an issue when your last account with the bank is closed.

  • Depending on the issuer you may be given a grace period in which to use your points.

If the bank closes your account you may initially not be able to do anything with your points. In most cases, as long as there’s no allegation of fraud, you’ll be able to either access the account briefly for redemption or receive some compensation for your accumulated balance. The bank is in the drivers seat here, though. And you have to push for anything you get.

American Express says if they close your account, points are forfeit, but if you close your account but have at least one non-Membership Rewards account still open you’ll have a 30 day grace period in which to use your points. Customers have had to jump through the most hoops to access points from closed Citi accounts.

New York State Senator Shelley Mayer introduced a bill that would require banks to give consumers 90 days to use their credit card rewards points if their account is closed either by the consumer or the bank.

That bill has now passed the state Senate. (HT: Danny Deal Guru)

Doctor of Credit notes that “During the recent American Airlines saga, American Airlines claimed the cancelled account holders participated in fraud and American Express uses misuse language when clawing back points/cancelling accounts.” In fact state law can’t do much with airline programs because the Supreme Court has ruled that states can’t impose regulations on airline frequent flyer programs.

Most importantly this legislation, which would only apply to consumers in New York, wouldn’t force the banks to allow redemption of points in the event of fraud by the cardholder – whether credit fraud or rewards fraud. The law would also ban the expiration of credit card rewards points, though of course bank points generally don’t expire as long as an account remains open.

Banks are heavily regulated already, and consumers have the CFPB for complaints. If this law is implemented banks can continue to shut down accounts unilaterally citing ‘rewards fraud’ as a reason.

And consumers should judge the value of a rewards program based on its behavior towards members. Ultimately it seems like a pretty low priority as far as regulations go, protecting the pretty well off credit card rewards members against a known risk (for those who’ve done their homework).

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Banks already have a method to deal with dormant accounts. Namely, a nominal monthly fee when a balance falls below an amount, or activity ceases. The problem with a bank taking points back, or not applying cash equivalent to an outstanding balance, is that it creates an incentive for the bank to close your account and/or accuse you of fraud.
    Reputable banks try not to behave like unreputable title loan companies or payday loan companies. Their late fees and overdraft fees, while excessive, aren’t close to or as punitive as title loan actions where the car is repossessed for a missed pymt or similar action.
    (In reality, some banks can be as bad!)

  2. This is absolutely a good thing. Citi closed my CitiPremier card last summer with no notice. Their reason was due to “high balances” on my credit report. The CitiPremier card was paid in full most months, and had been paid in full the month before closure.

    Citi confiscated over 80,000 ThankYou points, with no notice, and gave me no recourse. Contact with customer service went nowhere. It took a small claims filing to come to an amicable solution on the matter.

    This law would prevent exactly that ability to take unilateral action when the consumer has done nothing wrong.

  3. Just in time for banks to donate to a 2020 re-election campaign to make sure this bill gets buried. How convenient!

  4. Give the banks a break as they are having a hard time maintaining profits. Trump’s border wall has reduced the drug smuggling trade so the Mexican money laundering business is off. In Miami the South American drug dealers are laundering with stolen gold so real estate investment is off. Low interest rates have stopped the illegal foreclosures and LIBOR gaming business and the Wells Fargo scam exposed charging fees for illegally opened customer accounts. What are banks to do if they cannot turn to closing accounts and stealing points or clawing back points earned long ago? Bank employees have tried following customers home and robbing them with little success. Would you rather have the banks move on to shorting you cash on your ATM withdrawal or looting your grandmother’s safe deposit box?

  5. @AlohaDaveKennedy. That is kind of funny. Did you watch The Wolf of Wall Street? It was a more or less true story about upscale penny stock-broker company.

    On topic, most people are not aware of dormant account rules. If an account has not had a transaction for a while (determined by the bank), then the account can be considered dormant and the bank can send a check to the last known address or charge a dormant account fee.

    Wait, it gets worse. Based on State laws, if an account is dormant for long enough, the funds considered inactive and they are transferred to the State. If the State cannot find the account holder within a period of time, they add the funds to the State General Fund sort of as found money. If you have a backup account you have not accessed for a couple of years, I would investigate the banks dormant account rules and the State’s rules on inactive account.

  6. I agree it’s a toothless law, much like CA’s Beverly Song. There’s an exception for “MISUSE” which could mean next to anything!

  7. “Ultimately it seems like a pretty low priority as far as regulations go, protecting the pretty well off credit card rewards members against a known risk (for those who’ve done their homework).” So you are siding against your readers in favor of big banks? Law seems perfectly reasonable. People get cards shutdown for economic reasons and this simply allows people to use the points they actually earned. At a time like this with soo many people out of work and at risk for banks to pull their credit I would think a law like this is even more of a priority. Don’t see a downside here.

  8. Given that rewards are viewed as rebates on spend, it is fair for consumers to be able to use their points if their account is closed. If people earned rebates, they should be able to use them. However, most of the current issue stems from fraud or earning points against the terms of the credit card agreement like manufactured spending. The most government starts regulating rewards points, the more likely they’ll tax them or implement a cap on swipe fees like they did with debit cards. That will kill the rewards and sign up bonuses.

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