A recent rewards loophole turned free Credit Card points into unexpected debt – here’s how it happened, and how to avoid getting caught in a similar trap.
Credit Card rewards are a perk you enjoy when you sign up for a specific card in the form of points that you collect for spending on various categories, which can later be redeemed for vouchers, airline miles, or cashback. However, quite recently, we witnessed just how fast these free rewards can turn into unexpected debt when misused, even to the extent where some users are left facing negative balances and repayment demands. Let’s dive in.
Understanding Negative Reward Points
Negative reward points, though very real, are very rarely discussed and aren’t common knowledge. Essentially, negative reward points occur when you earn points on a particular transaction which you later cancel. Ideally, the system is supposed to reverse both the transaction and the points. However, if there’s a delay or a system glitch, and you happen to redeem the points you earned before the correction is made, your rewards balance may fall below zero.
This is when things can get messy.
Additional Reading: What You Didn’t Know About Credit Card Rewards
The Rewards Glitch That Cost Users Thousands
In a case that made finance media headlines in 2024, a bank’s Credit Card rewards system experienced a glitch and failed to reverse points on refunded transactions over the course of several months.
A few customers noticed the loophole and began to exploit it, in a classic case of the Indian “jugaad”. These customers would make high-value purchases, collect the reward points and then cancel the transactions. The glitchy system didn’t claw back the points as it ideally should have done and allowed the users to redeem these points anyway.
Finally, the bank fixed the glitch. However, by this time, several users had already used up their extra points. Thus, when the bank began adjusting the balances, it resulted in negative reward point accounts. While some customers’ rewards accounts showed a deficit, there were others – especially those who had closed their Credit Cards – from whom the bank demanded cash repayments for the shortfall. The cash repayment amounts ranged from a few thousands to several lakhs.
The Fallout
The fallout was ugly as is to be expected. Customers were both surprised and angry. Some customers argued that they had basically used the system as it appeared to work, without knowing it was actually a glitch. On the other hand, the bank highlighted its terms and conditions, which clearly stated that negative reward point balances would be treated as money owed. Interestingly, some parties pointed out that this clause was added only after some of the affected accounts were closed, which raised questions around fairness and retroactive policy enforcement.
Additional Reading: 8 Shocking Myths About Credit Cards And Credit Card Rewards
How to Stay Safe
Regardless of which side of the argument you may choose to stand on, one thing is clear – this incident is a cautionary tale. Even if you’re not trying to game the system, glitches can happen and you may be held responsible.
Here’s how to protect yourself:
- Don’t rush to redeem points that you’ve earned immediately after making a large-ticket purchase. Instead, wait to see that the purchase is not returned or refunded.
- Always keep a close eye on changes to your bank’s rewards programme terms and conditions. It pays to read the fine print always.
- Check your Credit Card statements regularly and make note of reward adjustments, especially after cancelled transactions.
- Finally, it could go without saying, but don’t employ online “hacks” or “jugaad” just to gain some extra value out of rewards. They may backfire as they could violate certain terms and conditions.
Credit Card points should always be treated as a bonus, adding value to your purchases, and should not feel like a liability. This incident shows us the importance of staying informed and cautious so that you can enjoy the perks of a Credit Card without falling down a slippery slope into the points trap.
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