Navigating the credit card rewards landscape

[UNITED STATES] For a certain segment of Americans, credit card rewards aren't just a perk—they’re a way of life. The niche economy built around credit cards and their benefits is driven by an appealing premise: spend money, earn rewards. And for those who master the system, the payoff can be experiences well beyond their usual means. Young cardholders I’ve spoken with have found themselves enjoying business-class flights or lounging in premium airport clubs. A few lucky Capital One users even nabbed presale tickets for Taylor Swift’s Eras tour. Others enjoy more everyday wins—like a friend who recently scored 10% back on a celebratory dinner at Olive Garden.

I’m guilty of playing the game myself. I’ve calculated which card to use for groceries or even at the laundromat to maximize points. It’s paid off—I haven’t shelled out cash for a flight in years and have skipped lines at music festivals thanks to my Chase card. Credit card rewards have become not just a consumer bonus, but a reason to spend in ways people otherwise might not.

Since rewards programs became widespread, they’ve largely dodged a major test: a traditional recession. The pandemic downturn was, counterintuitively, a boost for the credit card rewards ecosystem. Issuers upped their game to keep customers engaged despite lockdowns—offering extra points on delivery services or issuing statement credits. But as the economy shifts, so too does the rewards landscape. Digital payment platforms and fintech innovations have made rewards more accessible and personalized, often through mobile apps. Consumers can now track and redeem rewards more easily—but their expectations have grown accordingly.

Still, if the next economic downturn resembles those of decades past, rewards enthusiasts could be in for a reckoning. Airlines have already begun raising annual fees and tightening perk access. If the economy deteriorates further, rewards could shrink. That would be a harsh reality for consumers who’ve used points and perks to stretch their lifestyles.

“Rewards can be amazing and lucrative when managed well, particularly in good times,” says Matt Schulz, chief credit analyst at LendingTree. “But if you’re juggling multiple cards for points and suddenly lose your income, it can get dicey.”

There’s also a strong psychological pull behind rewards. Behavioral economists point to our craving for instant gratification and the illusion of getting something for free. That anticipation can drive consumers to spend more, regardless of long-term financial consequences. It’s a powerful tool for card companies—but a risky one for those who don’t manage their spending wisely.

Credit cards have long been embedded in American consumer culture, but their popularity has grown with the convenience of tap-and-go tech. According to the Federal Reserve, 82% of Americans had at least one credit card in 2023—up from 76% in 2014 and near the 2021 peak of 84%. Total outstanding credit card debt hit $1.2 trillion in late 2024.

Rewards are a key motivator. Some consumers use their cards for daily spending—groceries, essentials, a night out—and watch points accumulate. Others go all-in, engaging in “churning” (opening new cards to earn sign-up bonuses, then shelving them) or managing a suite of cards to squeeze every benefit possible. Regardless of approach, Americans love their rewards. An Ipsos poll from May 2024 found that 71% of U.S. adults own a rewards card, and 80% of those value the benefits. Over a third said they would spend less on their credit cards if rewards weren’t offered.

This enthusiasm also signals a broader shift in how people think about debt. Amid rising costs and stagnant wages, many use rewards to soften the financial blow and maintain their standard of living. Younger consumers, in particular, see rewards as both a tool and a lifeline. But the same group is also the most financially vulnerable. Ipsos found that 20% of Americans aged 18–34 use rewards to pay for things they otherwise couldn’t afford—and they’re also the least likely to pay off their balances in full. More than 90% of Gen Z and younger millennials reported carrying unpaid credit card debt for at least 90 days.

So while rewards may help maintain a lifestyle, they can also mask deeper financial instability. “We’ve assigned emotional value to rewards,” says So Yeon Chun, a professor at INSEAD. “They offer a way to extract extra value from everyday life—but only if you play the game well.” Rewards aren’t necessarily for the biggest spenders, Chun says, but for those who understand the rules.

“Reward points function like an alternative currency,” she adds. “They have tangible economic value but also aspirational, symbolic weight.” Companies are responding to this hunger for value. A 2023 Consumer Finance Protection Bureau (CFPB) report found that average credit card sign-up bonuses hit $326 in 2022—a 20% jump from 2019. Since 2020, about 91% of credit card spending has occurred on rewards cards, including among lower-credit consumers.

But the complexity of rewards programs poses challenges. Hidden restrictions, changing terms, and confusing rules can frustrate users. And as more consumers chase points, the market has become fragmented, making it difficult to compare options.

For younger users in particular, rewards can be both a lifeline and a trap. That same Ipsos poll revealed that many young adults use rewards to fund unaffordable purchases—while also being the most likely to fall behind on payments. Federal Reserve data shows 18- to 29-year-olds are the most likely to have credit card debt transitioning into default.

Chun notes that many middle-income Americans now rely on rewards not just for inflation relief but to preserve their lifestyle. Why are younger consumers so devoted to rewards? Some of it’s due to cost-of-living pressures. Others simply haven’t experienced a traditional recession. During the pandemic, government stimulus and issuer incentives made rewards more generous. But that pattern is unlikely to repeat in the next downturn.

Future recessions may prompt a shift from chasing perks to managing debt. “In a typical slowdown, issuers might maintain the appearance of stable programs while quietly cutting value,” Chun says. This could mean fewer high-value redemption opportunities, more rotating categories, and tighter expiration rules—similar to what happened after the 2008 financial crisis.

There are already hints of a pullback. Credit card rejection rates rose to 22.1% in early 2025, up from 16.6% a year earlier, according to the New York Fed. And fewer Americans are applying for new cards, signaling growing caution.

Even so, rewards aren’t going away entirely. “Banks will still use them to attract new customers, especially younger ones,” Schulz says. Points collectors, too, may find unexpected upsides if cash payers cut back. “If people stop booking hotels with cash, we might see more award availability,” notes Frank Pernice, co-runner of a points enthusiast group.

Issuers may get creative to cut costs while maintaining loyalty—like bundling perks with third-party services or offering credits that require activation, says Jintao Zhang of the University of Iowa. These bundles can obscure point devaluations and rely on consumers failing to redeem every offer.

For debt-carrying young adults relying on perks, that’s a hit. Simpler rewards like 1% cashback may become more attractive, offering straightforward relief amid financial stress.

“I think a lot of people are reconsidering what matters,” Schulz says. “Maybe instead of chasing that big bonus, it’s time to focus on cash back and building a savings cushion.”

And if the glamour fades from credit cards—fewer perks, higher interest rates—some consumers might turn to alternatives like buy now, pay later (BNPL) services. Nearly 1 in 5 adults under 30 have used BNPL, and they’re also the most likely to miss payments.

If rewards shrink or evolve, more consumers could flock to these emerging tools. At the very least, a shaky economy could push Americans to rethink their point-chasing habits. Schulz says some may turn to balance transfer cards, which help consolidate debt at lower interest rates. “They’re not as sexy as travel rewards cards,” he admits. “But for folks carrying a balance, they can be a lifesaver.”