Why Loyalty Points Can Vanish Overnight but Gift Cards Can't
Gift cards are protected by federal law for years. Loyalty and rewards points aren't, and companies can wipe them out overnight.
Harry Gao's Chase credit card account had never been late on a payment. Then Chase closed it anyway, and the rewards points he'd built up over two years disappeared with it — no warning, no chance to cash out, no compensation. Gao sued, and JPMorgan Chase agreed to pay $2 million in 2016 to settle the case, covering roughly 55,000 cardholders whose points had been forfeited the same way since 2009.
Compare that to what happens with a gift card. Try to sell a $50 gift card with a "expires in six months" sticker on it, and you're looking at a federal violation. Since 2010, the Federal Trade Commission has enforced rules requiring most gift cards to stay valid for at least five years and barring most dormancy fees. Retailers that sell gift cards live under a real federal floor.
Loyalty and rewards points don't.
The loophole hiding in plain sight
The Credit CARD Act of 2009, the law behind the FTC's gift card protections, carved out an exception for cards issued through "loyalty, rewards, or promotional programs." That single clause is why a store gift card you paid $25 for is legally untouchable for years, while the 4,200 points sitting in your grocery app can be wiped out the moment the retailer decides to change its terms.
There's no federal floor on how loyalty points expire, how much notice a company has to give, or what triggers a wipeout. A chain can reset your balance after 90 days of inactivity. A hotel program can void points the day you close an associated account. Starbucks changed its rules so that Stars now expire six months after the calendar year in which they were earned, a real tightening of a program that used to feel closer to "use them whenever."
Why the distinction exists at all
Lawmakers who wrote the CARD Act were responding to a specific abuse: gift cards that quietly lost value through dormancy fees or short expiration windows, effectively letting retailers pocket money customers had already paid for. Loyalty points are structured differently in the eyes of the law: they're framed as a promotional benefit a company chooses to extend, not a prepaid balance the customer purchased outright. That framing is also why companies can, and do, argue in court that they owe customers nothing when points vanish.
Chase argued exactly that in the Gao case: its marketing materials, the company said, disclosed that points could be lost if an account was closed. The bank denied wrongdoing even as it wrote the settlement check. It's a pattern that shows up across the industry: broad "points never expire" marketing next to fine print that says otherwise.
One state decided the gap was too wide
New York is the clearest exception to the free-for-all. In December 2021, Governor Kathy Hochul signed a law requiring credit card issuers to give cardholders a grace period to redeem accumulated rewards points after an account is closed, rather than letting issuers zero out the balance the moment they pull the plug.
"This legislation will guarantee a season of good cheer in New York State by making sure that no New Yorker unfairly loses their accumulated credit card rewards or is shortchanged when buying a gift card for a loved one."
Governor Kathy Hochul
New York paired that bill with a companion law tightening gift card rules even further, banning fees outright and pushing the minimum expiration window to nine years. But the rewards-points fix only reaches credit card rewards, and only in one state. Store loyalty apps, airline miles, and hotel points aren't covered by New York's law or by anything at the federal level.
What actually protects your points
Absent a legal floor, three things determine whether your points survive: the program's written terms, how closely you read them, and whether you stay active enough to avoid a dormancy reset. A few patterns show up across most programs worth knowing before you let a balance sit:
- Account closure (voluntary or not) is the single most common trigger for point forfeiture, and it can happen with no advance notice.
- Inactivity windows are getting shorter industry-wide, not longer; a program that gave you a year to use points in 2015 may give you 90 days now.
- "Never expire" marketing describes the points, not your access to them; account status still governs whether you can redeem what you've earned.
None of that is illegal. It's simply unregulated, in a way gift cards specifically are not. It's a distinction daybreakwire has covered before, in looking at how differently the law treats a card you paid cash for.
Consumer complaints about the gap haven't gone away. Scammers have started exploiting the same confusion, sending fake "your points expire today" texts that mimic real retailers to pressure people into clicking malicious links. It's a scheme that works precisely because shoppers already know their points really can vanish without warning. The FTC keeps enforcement pressure on gift card issuers specifically because the CARD Act gives it clear authority there. Rewards points, sitting just outside that authority, remain a company's call.
