The Silent Devaluation
A devaluation happens when a credit card issuer or loyalty program increases the number of points required for a reward, effectively making each point worth less. A flight that cost 50,000 points last year might suddenly require 65,000 points today. This
isn't a price hike you see on a sticker; it's a subtle but significant reduction in the purchasing power of the rewards you've diligently accumulated. For cardholders, it often feels like a bait-and-switch, as the value promised when they signed up seems to diminish without warning. Banks in India, from HDFC and ICICI to SBI and American Express, have all made adjustments, including reducing cashback caps, tightening lounge access rules, and increasing the points needed for redemptions.
Why Your Points Are Worth Less
There are several reasons behind this trend. Firstly, reward programs are a massive expense for banks. Every point sitting in a customer's account is a liability on the bank's balance sheet—a promise of a future payout. To manage this financial risk, issuers devalue points. Secondly, economic pressures play a huge role. Inflation means the cost of flights, hotels, and merchandise goes up for the banks, too. They pass this cost on by requiring more points for the same reward. Thirdly, banks are facing increased delinquencies and a slowdown in spending in some periods, making expensive, broad-based reward programs less sustainable. They are shifting focus to reward high-spending customers who generate more revenue, rather than offering generous perks to everyone.
Strategy 1: Stop Hoarding Points
The single most important rule in the era of devaluations is 'earn and burn'. Think of your points not as a long-term investment, but as a depreciating currency. Their value is almost certainly highest right now. Hoarding points for a dream vacation years down the line exposes you to the significant risk that they will be worth much less when you finally decide to use them. Experts advise against treating reward points as a savings account. Redeem them regularly for flights, hotel stays, statement credits, or vouchers to lock in their current value before any unwelcome changes are announced. Create a plan to use your points within a reasonable timeframe, such as 12-24 months, to avoid losing them to devaluation or expiry policies.
Strategy 2: Know Your Card's Sweet Spots
Not all redemptions are created equal. A point's value can vary dramatically depending on how you use it. Often, redeeming for travel directly through the bank's portal or by transferring to airline partners offers the highest value. Redeeming for merchandise or low-value gift cards can often give you the worst return. Take the time to understand your card's reward structure. Align your spending with the categories that offer accelerated rewards, such as dining, groceries, or fuel. Many banks in India are now linking premium benefits, like lounge access, to minimum quarterly spending, so understanding these new rules is crucial to maximizing value.
Strategy 3: Stay Informed and Diversify
Banks are required to communicate changes, but these notices can be buried in emails or lengthy terms and conditions documents. Make it a habit to read communications from your card issuer and periodically check their website for updates on your card's benefits. If a program is consistently devalued, don't be afraid to reassess if the annual fee is still justified. It might be time to switch to a different card that better suits your spending. Consider diversifying your rewards strategy. Instead of putting all your spending on one airline or hotel co-branded card, using a card with flexible, transferable points can protect you. This gives you the option to move your points to various partners, allowing you to pivot if one program's value drops.
