May 31, 2018
Now that apps and bots are streamlining the claims and collections process, some major banks are making changes to the price protection perk offered by their rewards credit cards.
One of the major selling points of some rewards credit cards issued by big banks is a Price Protection feature that promises to pay the consumer back hundreds of dollars if they make a purchase and then find the same item at a lower price within a stated period.
This has been more or less a marketing feature in past years since many consumers were unwilling to do the legwork to file a claim. Now, there are apps and "bots" that shortcut this cumbersome task, which is beginning to cut into bank profits.
Some major bank credit cards offer a price protection feature, which is now becoming expensive.
Price Protection As a Side Perk for Major Credit Cards
Credit card spending is currently at an all-time high, with the Federal Reserve reporting nearly $1 trillion in outstanding credit card debt. The competition among credit card companies for profitable customers is fierce, and many banks offer rewards to entice consumers to sign up for and use their particular cards.
One of the so-called side perks of some of the most popular credit cards is price protection. Companies like Chase, Citi, and Discover, will help consumers who paid too much for an item by refunding the difference, up to several hundred dollars.
There are time and dollar limits associated with these protections. Cardholders also needed to locate the better deal and submit documentation to the bank as a claim, which was generally a cumbersome ordeal. Unfortunately for banks, some new apps have streamlined this process and are putting a strain on profits.
Why Some Banks Are Cancelling Their Price Protection Feature
Some new apps and "bots" are now shortcutting the process of looking for a cheaper deal and even filing price protection claims with major credit cards. Companies like Earny and Sift have begun automatically alerting consumers to these lower prices or just having their bots file automated claims with credit card companies, some for just a few cents at a time.
Banks and claim administrators don't have automated systems to handle these claims, so they are experiencing soaring costs in several areas. First, they are now shelling out millions to consumers in price protection refunds. They also have to pay to process these individual claims, whether they are for several hundred dollars or a few cents.
Because of the unexpected impact of apps like Earny, which works with over 85% of credit cards offering price protection benefits, some major banks are changing their policies on perks. Citigroup paid $18.7 million in price protection refunds to cardholders in 2017. Beginning July 29, Citigroup has announced that it will change the annual cap on its price protection refunds from $2,500 per customer annually to $1,000. Chase plans to eliminate its price protection benefit altogether.
Discover is not going to eliminate its price protection benefit, but it does plan to scrap some other cardholder benefits. Among these are extended product warranties, car rental insurance, and flight accident insurance coverage. Discover does, however, require that cardholders make a phone call to file a claim, so the service doesn't work with apps like Earny.
Some banks are canceling their price protection feature now that bots are making it easier to file claims.
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