It’s easy to think of points and miles as a variation of Monopoly money. For some, it is easy to throw them away and spend carelessly; they can almost seem absurd.
For some, travel rewards can be easy to collect. They are currency, after all – and we can be as bad with our points bank as we are with our hard-earned savings account balances.
However, there is one very important difference between travel rewards and cash: Unlike most real currencies, which can be interesting if invested well, your points and miles are almost guaranteed to lose value over time.
In other words, points and miles are not a great long-term investment. The sooner you can use them after acquiring them, the more value you will get. We’re reminded of this every few months with painful airline and hotel price cuts when programs suddenly raise prices, often without warning, meaning you’ll need more points and miles than yesterday. In other words, your rewards become very small.
Let’s examine why carrying large balances of points and miles without a strategy for using them is a bad strategy. This will help you avoid putting yourself in a position of embarrassment, heartache and possible loss of value (rewards).
Related: Getting started with points, miles and travel credit cards
Points and miles discount
In recent years, we’ve seen a few drops from some of our favorite loyalty programs. The general mantra is that transferable rewards like Chase Ultimate Rewards points or American Express Membership Rewards points are less locked into discounting than rewards on a regular airline or hotel program.
Points like these can be used for a limited amount, at least.
But even remittances are getting better over and over again. For example:
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Downgrades happen so often that it’s easy to forget how many have happened. While some are worse than others, here’s a brief review of some of the biggest changes over the past few years.
Hyatt is adding higher prices and higher standards, moving more properties into the upper class
Hyatt remains a bright spot in the “free travel” world, consistently offering reliable award prices and great value for its points.
That’s still very much the case, but it continues to expand the ranks of popular hotels, making the World of Hyatt Credit Card’s annual free certificates even more valuable. This year, Hyatt announced that 137 hotels and resorts are moving to higher award categories, which cost travelers more points to stay at these properties.
Also, Hyatt’s latest partnership with Mr. & Mrs. Smith doesn’t follow the awards chart. These hotels have a variable rate, consistently delivering a value of less than 1.5 cents per point (which is below our December 2024 rate of 1.7 cents per World of Hyatt point). While that’s not the end of the world, it does mark the first time that Hyatt is flirting with dynamic pricing, which has us shaking our hands a bit.
Related: Easy ways to maximize Hyatt award redemptions
Marriott is ending its award chart
We thought Marriott was done with the coy price drop. After announcing it would throw its award chart in the bin, it moved to variable rates in 2022. Marriott continues to raise the ceiling on award night pricing – what was once 100,000 Marriott Bonvoy points is now 120,000 points and 150,000 points. (A few exotic locations are more expensive, such as the Ritz-Carlton Reserve properties and the infamous North Island, Seychelles Luxury Resort.)
Alaska Airlines’ award chart has come with a price drop
In March, Alaska Airlines reduced the price of the Mileage Plan award chart for long-haul flights within the US For example, economy flights within (or between) the continental US, Alaska and Canada from 2,101 to 4,000 kilometers see a 40% increase, from 12,500 km. to 17,500 miles.
Additional Avios are required for domestic flights operated by American and Alaska
This past year there have been several reductions in Avios on domestic flights. Across the five different loyalty programs that use Avios as their loyalty currency:
Finnair Plus is now the best option for booking multiple flights between the continental US (and Canada) with Avios, charging just 11,000 Avios each way in economy class, which is great for long-haul flights.
Related: 5 versions of Avios: When to use Aer Lingus, British Airways, Finnair, Iberia and Qatar Airways
Virgin Atlantic makes flying on ANA and Delta more expensive
Virgin Atlantic has some of the best deals on award travel in a long time – but they’re slowly turning around.
In early 2023, Virgin Atlantic is raising first-class award prices on All Nippon Airways by up to 42 percent, which is one sweet spot for miles. Then beginning in 2024, Virgin Atlantic began charging up to 60% more on select Delta Air Lines premium flights and up to 50% more on Delta One (business class) flights.
Later in 2024, Virgin Atlantic’s Flying Club program is increasing the cost of business class redemptions flying on ANA by 26 percent and adding a significant penalty to Delta One redemption costs to and from Europe (although availability is hard to come by. ).
What about money?
Even if you collect and redeem points at a fixed rate – which is the case when you have cards like this Capital One Venture Rewards Credit Carda popular option that lets you set up paid trips for 1 cent per mile — your rewards still lose value over time. The US Bureau of Labor Statistics estimates that the rate of inflation over the past 12 months has increased by 2.6% for major items.
What if you chose cash from scratch? We like to think of our travel rewards as “free,” but you’re giving up miles every time you swipe a rewards card instead of a cash-back card. This creates an opportunity cost, which we can add up to around 2% per dollar spent thanks to cards like Citi Double Cash® Card (see prices and fees), which gives you 1% when you buy and 1% when you pay (effectively 2% back on purchases).
If you were to choose cash back instead of points, you could invest that money to grow instead of watching the value of your rewards erode over time. Whether you choose a fixed value investment like a bond or pursue something riskier (but potentially more rewarding) like stocks or real estate, you should consider earning rewards that have the potential to grow over time — if you don’t plan to use them quickly.
How to get the most out of your points
Use your points and miles regularly, and don’t let your balances get too high. If you find yourself with hundreds of thousands of points but no travel on the calendar, find out when your next vacation will be and start planning.
If you are in the desirable position of earning more points than you can spend, consider sharing your wealth with friends or family members.
You might even consider switching to a cash-back credit card. There can be such a thing as having too many points and miles if you can’t use them fast enough. If you know that you can quickly replenish your loyalty accounts, earning cash right now is not a bad decision.
Another major form of protection involves diversification. The transfer fees on several airline and hotel programs are not as low, but they still provide many outlets for redemption if the airline or hotel program makes a major change.
So, if you don’t already have a card that earns transferable points, now is a good time to get one.
Diversity goes beyond credit card rewards, too. If you usually buy through the Delta SkyMiles shopping site, consider using the American Airlines shopping site for a few months instead. This will help you build a balance with another loyalty program, give you more options for award flights and protect your entire mileage balance from possible Delta depreciation.
Related: Airline credit cards vs. travel credit cards: Which are the best?
Bottom line
Points and miles can give you great returns today and amazing returns tomorrow. Simply put, this type of money is not for investment, as you are in the system’s demands, which can also increase prices from time to time without warning.
So, live by the “earn and burn” philosophy and get value from your miles before they depreciate. If you haven’t already, take a look at the points you currently have and make sure you plan to use them before the inevitable next wave of recession hits.
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