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Can I Keep My Credit Card Reward Points Once I Consolidate My Debt?

Can I still continue to obtain reward points that were saved from different credit card companies once I perform debt consolidation?

John C. in Bakersfield, CA

Hi John,

First, I want to congratulate you on consolidating your debt – it’s a great step toward debt relief!

Cashback cards, travel credit cards, and other rewards credit cards are popular ways to get a little something back for all the money you spend. You earned those points, and they’re worth real money. They can be great if you use them right, but some people fall into a trap of “purchase acceleration.” Basically, this means that they spend a lot of money at once to try to get as many reward points as possible. This method of using rewards credit cards can get people into huge amounts of debt.

Purchase acceleration is rarely a good idea, John, so don’t try to get a ton of points before you consolidate! It can make your situation even worse, meaning higher payments on your consolidated debt.

Now, let’s talk about the credit card reward points that you already have. It’s understandable that you want to hold on to your reward points even though you consolidated. Whether or not you can keep them depends on a few different factors.

Point and cash-back rewards credit cards

Typically, if the points are housed on the credit card itself, the consumer would lose the points/rewards if the card is included on a Debt Management Plan (DMP). That’s because your credit cards are generally closed when you enroll in the program. It’s in the fine print of many reward credit cards that you lose your points when the account is closed for any reason. This would happen with point reward credit cards and cash-back credit cards. So, before you enroll in the program, make sure to transfer the cash you’ve earned off the card or to cash in the points.

This is a little different than if take the DIY route. When you take out a consolidation loan on your own instead of enrolling in a DMP, you can usually keep your credit cards open, thereby keeping all the points attached to them. This can be tricky, though. If you keep the cards open, you could end up spending more on them and digging yourself deeper into debt. If you’re consolidating on your own, make sure to commit to stop charging, so you can focus on eliminating the consolidated debt before you make any new purchases. But you should be able to keep your existing points, as long as the lender that gave you the debt consolidation loan doesn’t require you to close your credit cards to get the loan.

Travel rewards credit cards

If you earned travel miles or points with the airline or other service provider, then closing the account should have no bearing. That’s because the points are no longer with the card, but with the airline company. For example, the Jet Blue card from Barclay’s earns miles which are then transferred to your True Blue frequent flyer program. Closing that card won’t cause you to lose the miles since they are already with Jet Blue.

Still worried about losing your credit card reward points? Just to be on the safe side, you can transfer, spend, or redeem them before you consolidate your credit card debt. Then you don’t have to worry about any points disappearing.

I wish you the best of luck! If you have more questions or need more information, don’t hesitate to give us a call.

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