Credit card rewards to become less rewarding

Such steps could intensify in coming months.

“If you have a 25,000 reward points for an airline ticket, it might go to 35,000 or 40,000,” Valentin said.

Bill Hardekopf, chief executive of Lowcards.com, a credit- card comparison website, also said that, even if reward targets do not change, customers might have problems redeeming points.

“Even though you may be getting the rewards, it may be harder to redeem the rewards,” he said.

Legislation could give merchants and retailers more power to negotiate the charges, following complaints from store owners that banks have colluded to set fee structures and block them from negotiating with payments networks Visa Inc and MasterCard Inc, who set the fees.

One bill sponsored by Democratic Senator Dick Durbin would also allow retailers to negotiate fees with American Express, the largest U.S. credit card company by sales and the third largest card network.

American Express could be the card issuer most affected by legislation, given that it generates a greater percentage of its revenue from retailer fees. Barclays Capital analyst Bruce Harting estimated the amount for 2008 at 53 percent.

In addition, American Express' flagship Membership Rewards program is a magnet for costumers, so any cut in the program could dull interest in the company's cards and hurt revenue.

“This could have a disproportionately large impact on American Express, as it has more spending than the typical bank card,” Moshe Orenbuch, an analyst at Credit Suisse, said in a recent report.

“We would expect reductions in rewards volume ... and higher incidence of annual fees to make up for most of the lowered interchange.”

Ralph Andretta, general manager of card member services at American Express, said the company's network was profitable for merchants.

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