A scary reason to redeem credit card points faster

Earning credit card rewards points through travel is fun and exciting, and it feels like you're building a special “savings account” for your travels. But the problem with travel reward points, especially frequent flyer miles and hotel loyalty programs, is that, like real money, they lose value over time.

That’s right: Airline frequent flyer programs and other travel loyalty programs can “Devalue” your miles and points at any time, If they choose. Just like travelers and credit card customers are constantly trying to get more value for your money (and your rewards points), airlines, hotels, and other travel companies are constantly trying to maximize profits, even if that means getting you Worth less for your reward points.

Let’s take a look at what losing value in credit card rewards points means for your travel dreams, and how to fight back.

Special offers: Save money when paying off debt with one of these top balance transfer credit cards

How devalued points hurt credit card customers

A new report from the Consumer Financial Protection Bureau (CFPB) released on May 9, 2024 found that the devaluation of rewards points is one of the biggest grievances reported by credit card customers. “Consumers mentioned that issuers and merchant partners reduced the value of earned rewards by increasing the number of points or miles required for redemption,” the CFPB report said.

Depreciating credit card rewards ultimately make your points worth less—just like the price goes up, but in points instead of dollars. Let's say you earn 100,000 frequent flyer miles using your favorite airline credit card. You'll use these miles to book flights to Europe. But suddenly, the airline announced that instead of 100,000 miles, booking a round-trip award flight to Europe would require 120,000 miles – your miles “devalued” by 20%.

Hotel loyalty programs can do this, too. If you're saving hotel loyalty points, you may find that you can't book as many free hotel nights as you expected. And rewards points devaluation doesn't always happen with some big, publicly announced, sweeping change. Sometimes, this happens quietly behind the scenes as popular flights and hotels see price increases – you may notice an increase in the price of redeeming points and miles when you're searching for cheap flights or hotel stays.

Airlines and hotel brands are always trying to charge the highest price they can get, and getting you to spend more miles and points is part of that calculation. But it can be frustrating to save points and miles only to find that they are difficult to redeem or are worth much less than before.

How to fight points devaluation: Spend money, don’t save it

The first thing to remember about credit card reward points is that whether you use an airline credit card, a hotel credit card, or a general travel credit card, Points are meant to be spent. Your credit card rewards are not a savings account. Points don't earn 5.00% interest like cash in the bank.

so Don't keep your points for too long. Even if you get a huge bonus welcome offer from your new credit card, have a plan on how to redeem those thousands of points. Try to use your travel rewards points as soon as possible during your vacation. If you wait another year, the airline may devalue your points, causing you to lose the equivalent of hundreds of dollars in value.

Diversify your credit card points “portfolio”

Another strategy to fight back against devalued credit card points is to avoid putting money into any airline or restaurant loyalty programs. Just like you should diversify your money as an investor (by owning a lot of different stocks and bonds), you should also diversify your “portfolio” of credit card rewards. Choose a travel rewards credit card that offers transferable points You can work with many airlines and hotels, not just one company.

For example, the Chase Sapphire Preferred® Card and Chase Sapphire Reserve® allow you to earn Chase Ultimate Rewards points, which can be transferred to multiple travel partners at a 1:1 ratio. It's like having multiple hotel and airline credit cards, all rolled into one. These Chase Travel Rewards cards allow you to transfer points to frequent flyer programs on United Airlines, Southwest Airlines and many international airlines.

For example, if you have 50,000 points on your Chase card, you can redeem those points for 50,000 United MileagePlus® miles. This way you can easily redeem your points (in the form of Miles) on any partner airline that offers great deals on the flights you want.

Airline credit cards are still a great way to earn frequent flyer miles, but read the fine print to make sure you're not limited to using miles with just one airline. For example, United MileagePlus® lets you use United Frequent Flyer miles to book award flights on Star Alliance™ international partner airlines.

bottom line

Don’t let devaluation of your credit card points stop you from having a great travel experience. Just be prepared for the possibility of a “price increase” in the form of requiring more points to book free travel. Like all businesses, airlines and hotels are always striving to maximize revenue. You can still get great deals with a little research, effort, and the best travel credit cards in your wallet.

Reminder: Our top-rated cash back card now has 0% APR until 2025

Not only does this credit card perform well, it's so good that our experts use it themselves. It comes with a lengthy 0% APR introductory period, up to 5% cash back rate, and all with no annual fee! Click here to read our full review for free and apply in just 2 minutes.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *