by Joseph Kenny | 12/21/09

Things are changing fast in the world of credit cards and consumers need to be aware of as many changes as possible. The credit card companies are getting quite innovative in the ways they are penalizing consumers for late payments. No longer do you stand to simply be charged a higher interest rate or a fee. Some companies are going to take your earned points or rewards away if your payment is late.

Here is what companies like American Express Co. are planning. The company issues cobranded credit cards with hotel and airline companies. The current travel companies American Express has joined with are Delta Air Lines, Starwood Hotels, JetBlue and Hilton Hotels. If you make a late payment the rewards you earned during the month with any of these companies through use of a cobranded credit card will not be posted to the account.

You can get the reward points back, but that will cost a $29 reinstatement fee. So now consumers are faced with paying a late fee for the late payment, a reinstatement fee to get rewards points back, and a higher interest rate in the future. American Express is not the only company instituting tougher rewards programs connected to cobranded cards either. Citigroup Inc. and JP Morgan Chase & Co. also offer cobranded cards.

Citigroup has indicated it will penalize cardholders for its own rewards program at this point and might institute a reinstatement fee for points made unavailable for redemption due to a late payment. Citigroup Inc. offers cobranded cards with American Airlines and Hilton but there will not be a reinstatement fee on these cards at this time.

JP Morgan Chase & Co. decided to handle late payments on its cobranded card differently. Chase cobrands with United Airlines and will not take away miles earned when a payment is late. Instead the miles will not accrue again until the account is paid in full. If there is a high balance it could mean no miles would be earned for a long period of time.

Why are the credit card companies making these changes? They cite several reasons. One reason is the credit card company wants to encourage timely payments. Another reason is the need to generate new revenue as a result of a poor economy.

Consumer advocates claim the new policies are merely a way for the credit card companies to replace old fees with new fees in anticipation of the implementation of the Credit CARD Act in February 2010. When the Act becomes effective, credit card companies will be able to raise interest rates or charge fees until an account has 2 late payments back to back. The advocates do not like the new policy because now everyone who is late with even one payment will be fully penalized on their rewards program.

The credit card companies say the answer is for consumers to not make even a single late payment. Card holders know a payment is due even if the statement is lost in the mail. Most accounts can now be managed online too making it easy to check balances and payment due dates.