For most people, pursuing credit card rewards is a game of cat and mouse. You keep a watchful eye on your credit score, seek out the best offers, and strike when the iron is hot.
But that is just one component of the hobby; the other part of the equation is that it can be extremely exciting to watch your point balances climb. Obviously, the more credit card rewards offers you sign up for, the more sign-up bonuses you earn, and the more spending you complete over time, the more points you accumulate.
If you love to save like I do, it can be tempting to do the same with your points and miles and hoard them in the same fashion as you would your monthly paycheck. But there are a number of reasons why you shouldn't treat your airline miles and hotel points like cash in the bank. Here are a few:
If you've been collecting airline miles or hotel points for any length of time, you've probably lived through at least one major devaluation. If you haven't, I'll explain what that means.
Basically, each frequent flyer and hotel loyalty program has a system that dictates how much each point is worth and, occasionally, they'll deem that their points have become too valuable and decide to make them worth less. A few examples:
- American Airlines – In February of 2014, American's frequent flyer program updated their awards chart to include five tiers while simultaneously increasing the number of points required for some of their most desirable redemptions.
- Delta Skymiles – The Delta frequent flyer program has lived through multiple devaluations, including big changes in 2012 and two changes in 2013. Although some tweaks were more noticeable than others, the changes ultimately made award flights more expensive and more difficult to book.
- United Airlines – In early 2014, United updated its award chart to increase the number of miles required for award bookings on United and their partner airlines. Most of the increases were aimed at international reward bookings and business and first class redemptions, but it still hurt.
- Southwest Airlines – Unlike many other frequent flyer programs, Southwest Rapid Rewards has a price-based redemption system, meaning that award seats are priced (in points) based on the price of the fare. As of late 2013, Southwest fares were boosted so that you needed 70 points for every $1 on a Wanna Getaway Fare instead of the 60 points you needed previously. Even worse, Southwest recently announced another devaluation set to take place this April, although no further details have been released.
Notice a pattern? If you follow the history of frequent flyer programs, you'll notice that their currency becomes worth less and less with each passing year. And this phenomenon isn't limited just to airlines; major hotel loyalty programs have gone through countless devaluations over the years, including big changes from Hilton, Marriott, and even Starwood Preferred Guest. Just remember, award chart changes are never in your favor, and they always result in your points being worth less.
Beyond devaluations, it is important to understand that many credit card points expire if they remain inactive for a certain length of time, too. In some cases, they expire if you don't earn or spend any miles within a span of 12 to 24 months and, in others, they will expire if you close your account.
Keep in mind that you generally just need to earn or burn some miles to keep your account active, and that earning just a handful of points can reset the clock and keep your account in good standing.
Here are some of the most popular programs' expiration policies:
- American Airlines: 18 months
- British Airways: 36 months
- Delta Skymiles: no expiration
- United Airlines: 18 months
- Virgin American: 18 months
- Club Carlson: 18 months
- Hilton: 12 months
- Hyatt: 12 months
- Starwood Preferred Guest: 12 months
You get the picture, but can you imagine keeping track of multiple point balances over multiple programs? Imagine saving a hefty balance of points in one program for a year only to find out that your points expired and your effort was all for naught. Unfortunately, that happens all the time, and often to those who are saving their balances for a special trip or redemption.
In addition to worries over devaluations and expiration policies, another good reason to cash in your points frequently is plain ol' inflation. The fact is, credit card rewards don't collect interest, so no matter what, the value of your points will erode over time. And even if you are just collecting cash-back rewards, the money you accumulate will be worth less this time next year.
Points and miles — the perfect excuse to spend
If you have been saving your points and miles for a while, you probably have a healthy stash. But it is a good idea to think of your account balances differently than your actual investments. Because unlike your retirement accounts, your point balances only stand to lose value over time. Think of it this way: Saving points and miles is kind of like keeping them in a savings account that actually charges you five to 10 percent interest each year.
So if you are sitting on a mountain of points, consider burning them before it's too late. Take stock of what you have and see if you can use them for this year's spring break or your summer vacation plans. Search around for the best redemptions and use your points in the way they were intended instead of letting your balances grow month after month. And after you book your dream trip, consider opening a vacation savings account to help pay for everything your points and miles won't cover.
And have fun with it! Because when it comes to points and miles, it never pays to save.
How often do you redeem your points and miles? If you tend to save your points and miles, are you saving up for a special trip or purchase?
Author: Holly Johnson
Holly Johnson is a credit card expert, award-winning writer, and mother of two who is obsessed with frugality, budgeting, and travel. In addition to serving as contributing editor for The Simple Dollar and writing for publications such as Bankrate, U.S. News and World Report Travel, and Travel Pulse, Johnson owns Club Thrifty and is the co-author of Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love.