Plenty of credit-card issuers offer reward programs, but cashing in the points the programs offer has become increasingly difficult for many cardholders.

Over the last few months, many credit-card issuers have been introducing new rewards cards, revamping old ones and piling on the perks in an attempt to reel in more lucrative customers. Analysts say the moves bode well for the industry.

However, issuers still face two formidable hurdles: ballooning default rates among the original customers and tighter regulations imposed by the passage Credit Card Accountability, Responsibility, and Disclosure Act. To bolster profits, many card issuers have subtly reined in their rewards programs. And rather than devaluing points, many are turning to some clever maneuvering on the back end, credit experts say.

Take Discover Financial s 5% cash back card, which promises to return 5% of the value of all charges through rewards but now docks points for inactivity. If a cardholder s account is closed for any reason, sits inactive for 18 consecutive months or if the cardholder fails to make the minimum payment by the due date for two consecutive billing periods, the cardholder s Cashback Bonus will be forfeited, according to the company s web site.

Cardholders receive such a bonus, which amounts to their next month's interest fee, each time they make six on-time payments in a row.

Capital One Financial says cardholders that make a late payment will lose the miles they earned during the billing cycle in which the payment was late. The rest of their rewards remain intact, according to a company spokeswoman.

American Express and Citigroup s Diner s Club International cards also reduce rewards for late payments. However, users who want their rewards back can have them restored by paying $29 and $15, respectively, for each month of points reinstated. Separately, Bank of America and other rewards card programs offered by Citigroup have reserved the right to add fees in the future. The companies terms and conditions refer to a reinstatement fee to restore seized points, though there s presently no charge. Bank of America customers who are late on a payment by 60 days or more are unable to earn or redeem points, says a spokeswoman. However, once the cardholder s payments become current, they ll regain access to all of their points. Chase says customers who see their accounts close after being 60 days or more delinquent on payments forfeit their reward balance and there is no opportunity to reinstate points -- even for a fee.

We want to incent card members with past due balances to pay their past due balance on time and return their account to good standing, says an American Express spokeswoman. The incentive appears to be working. During the first quarter of 2010, AmEx reported that its card business unit earned $428 million, up from a loss of $7 million a year earlier. The company said just 3.3% of the company's U.S. cardholders were a month behind on their payments, down from 5.1% a year ago.

Some card industry observers say issuers may continue to make changes to their rewards programs. One of the unfortunate results of the new restrictions on credit cards, besides the decrease in the availability of credit, is that added pressure is being placed on rewards, says Scott E. Talbott, the senior vice president of government affairs at the Financial Services Roundtable, an industry group in Washington.

Curtis Arnold, the founder of credit education web site CardRatings.com, says that issuers will try to avoid reducing rewards across the board to avoid backlash. However, the back-end tactics are likely to become more widespread, he says. As issuers look for ways to offset missed profits from the CARD Act, cardholders could see more rewards restrictions going forward, Arnold says.

The government has some power to intervene. The Federal Reserve may step in, says Josh Frank, senior researcher at the Center for Responsible Lending in Durham, N.C. As the Fed examines penalty fees, the regulator might also examine and issue a rule regarding how companies use rewards as penalties, he says. The revocation of rewards is in effect a penalty, he says. If you have accrued a reward and get it taken away for being one day late, that is an unreasonable and unproportional penalty in our opinion, Frank says.

The Fed has already tamped down on other penalties. In early March, the Fed proposed a rule that would bar card issuers from charging late-payment fees or other penalties that exceed the dollar amount of a cardholder s violation of the account terms. The rule, which would take effect on Aug. 22, would require card issuers to inform consumers of the reasons for interest rate increases. Issuers must reevaluate their reasons for rate hikes issued after Jan. 1, 2009, every six months and if the review finds that circumstances have changed, they must reduce the rate where appropriate.

The proposed rule would also prohibit issuers from charging multiple penalties for a single late payment or account terms violation, and ban issuers from charging inactivity fees.

No matter how the Fed rules, consumers need to be fully aware of their cards terms and conditions, says Talbott. Having a credit card should be about managing your money and rewards should be an ancillary benefit, he says. Let the finances drive the transaction.

Next week, Card Sharp looks at how cardholders can get the most from their existing rewards programs.