New York Senator Proposes 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.

New York State Senator Shelley Mayer has 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.

Here’s the relevant text of the proposed law.

IF ANY CREDIT CARD ACCOUNT OR REWARDS PROGRAM IS MODIFIED, CANCELLED, CLOSED OR TERMINATED, THE HOLDER MUST RECEIVE NOTICE FROM THE ISSUER OF SUCH CANCELLATION, CLOSURE, TERMINATION OR MODIFICATION AS SOON AS POSSIBLE, AND IN ANY EVENT WITHIN FIFTEEN DAYS OF SUCH CANCELLATION, CLOSURE, TERMINATION OR MODIFICATION. BEGINNING WITH THE DATE ON WHICH NOTICE IS SENT, THE HOLDER SHALL HAVE NINETY DAYS TO REDEEM, EXCHANGE, OR OTHERWISE USE ANY CREDIT CARD POINTS THAT THE HOLDER ACCUMULATED AT THE TIME OF SUCH MODIFICATION, CANCELLATION, CLOSURE, OR
TERMINATION AS PERMITTED UNDER THE TERMS OF THE AGREEMENT OR AGREEMENTS BETWEEN THE HOLDER AND THE ISSUER, AND THE HOLDER AND ANY THIRD-PARTY WHICH IS SERVICING THE APPLICABLE CREDIT CARD ACCOUNT OR RELATED REWARDS PROGRAM, SUBJECT TO THE AVAILABILITY OF REWARDS.

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.

I’m not sure I see a groundswell for this, and it wouldn’t surprise me to see plenty of pushback from the banks. I’m not predicting this becomes New York law at this point but an interesting development.

I’m also not sure I see the consumer harm that’s being addressed here. I certainly would understand in the case of an airline shutting down accounts – there’s little redress other than filing a DOT complaint and DOT has been found to improperly ignore complaints about frequent flyer progams. But banks are heavily regulated, and consumers can generally manage their own points effectively – and would be able to continue to shut down accounts unilaterally under this law citing ‘rewards fraud’ as a reason.

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!

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