This Is the Moment of Redemption (for Credit Card Points)

Americans are flush with credit card points. By 2023, cardholders with three of the biggest issuers had racked up more than $34 billion worth of them – a 70% increase from 2019, according to a Wall Street Journal analysis.

But rapidly rising prices have taken a big bite out of credit card point values just as they’ve eroded the purchasing power of our dollars. In the post-COVID era, everything from groceries to construction materials has grown significantly more expensive, and unlike investments, points can’t grow to offset that inflation; their redemption value remains more or less fixed at around one cent per point. (It’s actually far more convoluted if you care to dive into that particular rabbit hole).

Consumers have accumulated such a big stockpile of points for two reasons: They weren’t using them to travel during the pandemic, and anytime they spend more money on their cards, they earn more points.

But since 2019, inflation has reduced the purchasing power of a penny (and, in turn, a point) by
more than 20 percent. And it can get worse when you transfer points to airline or hotel loyalty programs, some of which have jacked up their redemption thresholds to keep pace with rising prices. One frequent traveler reported a flight that would’ve cost 60,000 points last year requires 80,000 to 90,000 points today, according to the Journal.

Credit card points have become a political issue too. In September, the Transportation Department launched an inquiry into some airlines’ loyalty programs and legislators have introduced bills that could jeopardize, or at least change, the rewards landscape in the coming years.

So what? Experts suggest using your points ASAP to avoid “pointsflation.” If you’re sitting on a pile, this could be the ideal moment to cash them in to fund this year’s holiday shopping, shore up your emergency fund, or book a trip.

Related Reading

•   A Beginner’s Guide to Traveling on Points and Miles (NerdWallet)

•   These Are the 3 Worst Ways to Redeem Credit Card Rewards (CNBC Select)

•   15 Ridiculous Skymall Products (Pointchaser)

photocredits: iStock/andreswd

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