During financial pinch, banks reduce credit card rewards

— -- Banks are getting stingier with their credit card rewards programs.

American Express recently axed the domestic companion airline tickets provided free to Platinum and Centurion cardholders. JPMorgan Chase rolled out what industry watchers say are less generous rewards for some customers. And Discover now requires cardholders to forfeit cash rewards if an account is inactive for 18 months or if they pay more than two months late.

Banks have dangled such rewards as cash and airline tickets since the 1980s to encourage consumers to charge more, and more often, to their credit cards. Through the years, benefits have become more generous and more outlandish (think concert tickets and space flights) as banks competed for consumers' dollars. But now, struggling to pay their own bills, some banks are retrenching.

"You're going to see more and more of the trimming down of the benefits that aren't so popular or aren't so prestigious," says Megan Bramlette, managing associate at Auriemma Consulting Group, which advises banks.

The moves are akin to those seen from the airline industry last fall. When faced with record fuel prices, airlines began making it more difficult for fliers to earn free tickets, among other changes.

But paring back on rewards is short-sighted, says Greg McBride, senior analyst at Bankrate.com, a consumer information site, because "you're basically kicking customers to the front porch of competitors."

In November, American Express discontinued its free domestic airline ticket program because few cardholders were using it, says spokeswoman Desiree Fish. The decision, she says, was not economy-related.

American Express is planning other cost-cutting moves, such as expanding its program to include less costly rewards, Fish says. By streamlining the rewards program — and scaling back spending on technology, marketing and business development — the company expects to save about $1 billion this year.

At Chase, consumers who got the Freedom credit card after Nov. 4 are receiving a 1% cash reward on most purchases and a 3% reward on promotional items, which regularly change. Before, the card provided a 3% automatic cash back on the categories in which consumers spent the most.