Update: Capital One gift card redemptions back (but no hotel cards)

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Update 4/30/20: A couple of readers commented yesterday (here and here) to let us know that gift card redemptions are back. Unfortunately, there are not currently any hotel chain gift cards available (including the high value gift card redemptions that were formerly available for some of us). We reached out to Capital One about this and we were told that they “expect to bring additional merchants back in the upcoming months”. Unfortunately, it looks like all current gift card redemptions are now at a value of 0.8c per point Update: Currently available gift card redemptions offer either 0.8c per point or 1c per point; previously, some hotel card redemptions were as good as 1.4c per point for select cardholders. Hopefully we’ll see those hotel brand gift cards return.

Update 4/1/20: After publishing this post, Capital One reached out to affirm that this is a temporary change. They tell us: “Due to operational constraints from COVID-19, we are temporarily unable to fulfill gift card rewards. We are working to restore this redemption option as soon as possible.”. In other words, the official statement from Capital One is that this is an issue in the supply chain rather than an effort to slow down redemptions and they are working on restoring this functionality. Hopefully we’ll see that sooner rather than later, though fulfillment could obviously be a challenge in the current environment as noted below in the original post.

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Well, this is a bummer: Capital One has removed gift card redemptions (update: As shown above, these have been restored to some extent). It appears that this is the case across all Capital One cards. You can still redeem points against travel purchases or for a statement credit (but don’t take a statement credit since that will only give you half a cent per point in value).

We’ve seen several loyalty programs cut gift card redemptions over the past few days, but I believe this is the first bank program to do so. I checked Amex, Citi, and Chase and all of them are still offering gift card redemptions (though keep in mind that values vary and are generally relatively poor). Note that gift card redemptions were eliminated across the board: I checked both “miles” earning cards and “cash back” cards and even a couple of old / no longer available Capital One card accounts of family members. Gift cards are gone from all of them.

I am particularly bummed about Capital One removing gift card redemptions because I have written before about one of my Capital One accounts being among a group that was grandfathered in to a particularly good “Get Hotel Special Offers” gift card section that offered $900 gift cards to a number of hotel brands (including Marriott) for 64,250 points (a value of 1.45c per Capital One point). I have no idea if that redemption will still exist for me when they bring back gift cards. (Update: Gift cards are back, but not this redemption or any other hotel gift cards yet).

I am kind of surprised to see Capital One nix gift card redemptions. Greg and I discussed this on Frequent Miler on the Air this past weekend: it isn’t surprising to see loyalty programs cut gift card redemptions since those cost dollars and cents that hotel brands and airlines just aren’t bringing in right now. Those travel companies have to cut costs somehow.

But credit card programs offer gift card redemptions because they are presumably even cheaper to offer than statement credits or airline miles. In Capital One’s case, that isn’t entirely true: Capital One only offers half a cent per point when you redeem “miles” for a statement credit, so gift card redemptions (which previously varied between 0.8c per point and 1c per point for most gift cards) would likely be more expensive for the bank even presuming that they don’t pay face value for gift cards. However, you can still redeem 2 Capital One “miles” for 1.5 airline miles in a number of programs. That has to be much more expensive for Capital One than offering gift card redemptions.

It is of course possible that the company that fulfills gift card redemptions has scaled back or closed operations, making it impossible to keep up with demand. Or Capital One could just be looking to slow down a “run on the bank” in terms of using rewards. I imagine most consumers aren’t redeeming rewards for airline miles at the moment, so while those redemptions may theoretically be more expensive for the bank, likely aren’t seeing the same increase in demand as gift cards.

So the short version of the long story is that the elimination of gift card redemptions was likely a way to slow people from panic-redeeming points for gift cards and/or an issue with supply. I imagine that gift card redemptions will eventually come back to Capital One cards. Will other credit card programs eliminate gift card redemptions? I think it’s doubtful that Chase will eliminate them since gift cards are presumably less expensive than statement credits, but for other programs that offer poor ratios for cash redemptions, it’s not impossible that we’ll see gift card redemptions scaled back.

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Rodrick

Just checked and gift cards are back. But, Marriott is gone

[…] h/t Frequent Miler […]

[…] reports that Capital One has removed gift card redemption options from their credit cards. A lot of Capital […]

jc1

In my opinion, this has more to do with liability than anything. With so many businesses shut down and a real possibility that one or more retail or restaurant business may go out of business that sell gift cards, Capital One likely was looking to the future. If XYZ restaurant gift card that a customer redeems for goes out of business will the customer blame Capital One for not protecting them and thus complain to the company or stop using their card.

Oftentimes companies that are on shaky ground are removed from the gift card selection of major credit card companies from what I have observed in the past.

Bob
Mendel Brod

Bb&t is doing the same thing, you can’t order gift cards.
I don’t believe this is because they can’t ship, this is all automated with the volume they deal with. Obviously it’s to cut cost during this tough time.

[…] as much as 1.45c per point toward $900 gift cards for a few hotel brands). However, they have temporarily suspended gift card redemptions due to the COVID-19 […]

Todd Tomlin

Thanks for the post Nick – I just shared your article on LinkedIn. I do agree with Laurel that there may be a distribution issue here as well. Some (plastic) gift card distributors are not able to operate at this time, but that shouldn’t stop digital gift cards from being distributed. Hopefully this trend reverses soon!

Dmc

It may have something to do with Caputal Ones future solvency.. https://www.zerohedge.com/markets/cftc-quietly-bails-out-capital-one

Laurel

Blackhawk is a big gift card dealer based in Pleasanton, California, which has been under stay-at-home orders since March 16th, and they are likely not considered an essential business, so this might be part of why so many gift card redemption programs have gone offline.

Ed K

Most companies involved in financial services such as debit cards (for those without checking accounts) are considered essential services. The government doesn’t want to kill commerce. Yes, temporary stay at home orders are in place, but even trucks (trade/commerce) are permitted to come from the COVID-19 hot spots. They have to in order to supply those in the medical field and that means people. We all have a part to play to help each other and ecommerce, banks, debit card manufacturers, medical, farmers, truckers, trains, pipelines, law enforcement, communications (tv broadcasters, cell, radio, internet, cable and so many others are essential. Each state has a list, but many are basing their lists on the fed list. Many Americans are still working their office jobs, but from home. Some retailers must stay open.