US Economy News Today: Do Credit Card Rewards and Airline Points Contribute to the Economy?

After Complaints Soar, Federal Regulators Looking at Airline Miles, Credit Card Rewards

Are consumers getting a raw deal with reward points on their credit cards?

Some federal regulators are starting to ask that question, including the Consumer Financial Protection Bureau (CFPB), which released a new report showing that the agency got 1,200 complaints in 2023 about credit card rewards, a 70% increase compared with pre-pandemic levels.

“Credit card companies promise upfront benefits for signing up and using their rewards card, but often bury complex terms in the fine print for using the rewards,” said CFPB Director Rohit Chopra. 

The CFPB identified a few themes in the credit card reward complaints, starting with vague or hidden conditions that kept consumers from getting their rewards. Consumers also complained that credit card companies devalued their rewards, or sometimes revoked previously-earned points, while others reported encountering customer-service issues that prevented redemption of their rewards. 

“The CFPB will be looking for ways to protect people's points, stop bait-and-switch scams, and promote a fair and competitive market for credit card rewards,” Chopra said. 

The report comes on the same day the CFPB and the Department of Transportation held a joint hearing on airlines' frequent flyer miles and their connection to credit card rewards.

“Point systems, like frequent flyer miles and credit card rewards, have become a meaningful part of our economy,” Transportation Secretary Pete Buttigieg said at the hearing.  “For many Americans, point balances are significant enough that they amount to part of their savings.” 

Buttigieg said the department was studying how airline rewards impact competition in the airline market, noting that loyalty programs can often inspire customers to choose higher-priced tickets and services in order to earn benefits. 

“Reward offers are enticing enough that they significantly shape how customers interact with airlines and credit card companies,” Buttigieg said. “We’re going to look into how we can make sure companies are being straightforward about what people can get in these frequent flyer miles or loyalty programs when they sign up and whether people are actually getting the deal that they were promised,” Buttigieg said. 

-Terry Lane

Initial Jobless Claims Jump to Highest Levels Since August

The number of new people claiming unemployment insurance jumped last week to its highest level since August.

Unemployment claims increased by 22,000 from last week’s reading to reach 231,000 for the week ending May 4, Labor Department data showed.  The increase caught the market by surprise, as economists surveyed by the Wall Street Journal and Dow Jones Newswire expected a more modest 214,000 initial jobless claims.

The weekly measure of initial unemployment claims is often volatile, and economists often look to the four-week moving average for more stable data. That measure increased as well, jumping 4,750 from the prior week's revised average.

The surge in unemployment claims comes as Federal Reserve officials are looking to see some softness in the labor market, which could help bring down wages in the surging inflation equation. 

When the job market has many jobs but few people to fill them, employees often have the leverage to ask for more pay. However, those companies often pass on the increased labor costs to their customers.

The data follows an April jobs report that saw new job creation come in lower than economist expectations. 

-Terry Lane