41% of Millennial Travel Credit Cardholders Closed Their Card Due to Pandemic

Thanks to the pandemic, there’s a lot less travel taking place, and it’s affecting how people use (or don’t use) their travel rewards credit cards. With 46% of consumers carrying a travel rewards credit card, many are thinking about what will happen to their points and miles since there are no travel plans for the foreseeable future.

Based on some of the results in ValuePenguin’s recent survey of credit card users, people are indeed rethinking their credit card habits.

Key findings

Here’s a deeper look at what survey respondents had to say about their rewards card outlook.

Some close or stop using travel cards, others open new ones

Survey respondents seem to fall into one of two camps when it comes to travel cards: Those who are closing travel cards and/or switching to different cards (like a grocery card) to maximize their spending while stuck at home, and those who are trying to take advantage of new deals and perks offered by travel card issuers. Deciding which points and miles strategy is best during a pandemic can be a challenge, but here’s what consumers are saying:

"Generally speaking, it is not a good idea to close a credit card," said Schulz. "The primary reason is that it can take a toll on your credit score, mostly by affecting your utilization rate." That’s how much debt you have compared to your available credit, and it’s the second most important factor in credit scoring after your payment history.

"Closing a card can wreck [utilization] because it reduces your available credit without shrinking your balance," Schulz explained.

Instead of closing a card, consider leaving it open and using it for a small recurring payment like a streaming subscription, said Schulz. The one exception is if you’re carrying a rewards card with an annual fee, but no longer getting value from it. In that case, you could consider asking the issuer to downgrade your card to a version with no annual fee.

Otherwise, "the hit to your credit from closing a card won’t be so huge that it justifies paying $89 or more a year for a card you’re never going to use anymore," said Schulz.

Cardholders consider redeeming travel rewards amid pandemic, despite reduced value

So is cashing out your travel rewards a good idea? On the one hand, the value of an airline mile is worth more than the 1 cent per point most cards offer for cash back or gift cards. Still, some cardholders feel that getting something is better than nothing, especially if the rewards help bridge the gap during a tight economic period.

Here’s what the survey revealed:

"There's no one-size-fits-all answer to what you should do with your travel points right now," said Schulz, recommending that you let your own personal circumstances drive your decision. For example, if you feel your job is stable and you have an ample emergency fund, it can make sense to hold on to your points until you're comfortable traveling again.

Many fear losing their travel rewards as some book trips to avoid expiration

Is this a legitimate fear? Among many cardholders it is.

"It's completely understandable that people would be concerned about points expiring," said Schulz. However, he does point out that card issuers have been flexible thus far: "The truth is that no company wants to be seen as having left its customers high and dry during the pandemic."

Nearly 30% are fighting to get reward refunds after trip cancellations

Especially early on in the pandemic, there were horror stories about how challenging it was to cancel trips and get your points or miles back, said Schulz, speaking from experience.

"I ended up spending several hours on the phone, waiting to get helped, only to get hung up on more than once," he said. "To Chase and United’s credit, I ended up happy with how the issue got resolved, but it did take a long time and was quite frustrating."

Along those lines, our survey found that 28% of Americans who booked a trip using travel rewards and had to cancel due to the coronavirus were not able to get their points or miles refunded back to their account.

What should you do with your travel rewards card during the coronavirus pandemic?

Anytime you have a rewards card, there is always some risk that programs may change or points will expire before you get to use them. In this scenario, you might even be wondering if the brands associated with your airline and hotel cards will still be around when you decide to cash in and travel again.

"There are so many variables and unknowns around everything involving travel and loyalty and credit cards that it is impossible to know what things will look like when this moment is in the rearview mirror," said Schulz.

That said, here’s what you should do:

"If your financial world has been flipped upside down by the virus, that dream of a vacation to Paris or Thailand should probably take a back seat to using points to help pay your everyday bills," said Schulz. Luckily, many points and miles cards offer the option to choose statement credits, cash back or gift cards — all of which can be used to offset some everyday expenses.

Methodology

ValuePenguin commissioned Qualtrics to conduct an online survey of 1,243 Americans, with the sample base proportioned to represent the overall population. The survey was fielded July 10-13, 2020.

Generations are defined as the following ages in 2020: