The Silent Threat of Devaluation
Credit card points feel like free money, a reward for everyday spending. But unlike actual currency, their value is not fixed. This concept is known as devaluation, and it happens in two primary ways. The first is through inflation; as the price of flights
and hotels goes up, the number of points you need to book them increases, effectively lowering the purchasing power of each point. The second, more direct way, is when a bank or airline loyalty program explicitly changes its rules. They might increase the points required for a specific reward, change transfer ratios to partners, or remove high-value redemption options altogether. This means the 50,000 points that could get you a round-trip ticket yesterday might only cover a one-way flight tomorrow.
Why Your Points Balance Isn't a Savings Account
It's tempting to hoard points, watching the balance grow while dreaming of a lavish trip. However, experts agree that points and miles are a terrible long-term investment. They are a liability on the credit card company's books, and issuers have every incentive to reduce that liability. Banks can and do change terms at their discretion, often with little to no warning. Recent years have seen a clear trend of loyalty programs becoming less generous. Perks like lounge access are being restricted, sign-up bonuses are shrinking, and some transfer partnerships are becoming less favourable. Storing a large balance of points without a plan is like leaving cash under a mattress during a period of high inflation—its value is almost guaranteed to go down.
Conducting Your Personal Points Audit
To protect yourself, you need to know what you have and what it's worth. A personal points audit is simpler than it sounds. First, create an inventory. List all your credit cards, the loyalty program for each, and the current points balance. Don't forget airline and hotel programs. Next, determine the current value. A quick search for your program's points value can give you a baseline, with some experts providing monthly valuation charts. For example, one point might be worth 1 paisa for cash back but 50 paise when transferred to a specific airline. Finally, check for recent and upcoming changes. Visit the loyalty program's website or reliable financial news sites to see if any devaluations have been announced for your specific cards.
Strategies to Protect Your Points' Value
Once you've audited your points, you can make a plan. The number one rule from experts is to adopt an "earn and burn" strategy. Instead of hoarding, use your points regularly to prevent them from losing value over time. If you have a specific, high-value redemption in mind like a business-class flight, it can be worth saving for. But for most people, redeeming points sooner is better than later. Another key strategy is leveraging transfer partners. Often, you can get significantly more value by transferring points to an airline or hotel program than by redeeming them for cash back or gift cards through the bank's portal. Be sure to check transfer ratios, as these can also be devalued. If you have no immediate travel plans, redeeming for statement credits is a straightforward way to lock in a guaranteed, albeit often lower, value.
