Why points and miles are a bad long-term investment

It’s easy to think of points and miles as a variation of Monopoly money. For some people, it is easy to overspend; they almost seem ethereal.

Others, travel rewards can be easily stored. After all, they’re a form of currency — and we can get as stingy with our points stash as we can with our hard-earned savings account balances.

However, there is one very important difference between travel rewards and cash: Unlike most real currencies, which have the potential to appreciate if invested well, your points and miles are virtually will certainly lose value in the long run.

In other words, points and miles are not a great long-term investment. The sooner you can spend them after earning them, the more likely you are to get more value. We seem to be reminded of this every few months with painful devaluations of airlines and hotels.

Let’s look at why carrying a large amount of points and miles without a plan to use them is a bad strategy. This will help you avoid setting yourself up for disappointment, heartache, and possible loss of net worth (loyalty).

Related: Start with points, miles and credit cards for travel

Points and miles lose value

Over the past few years, we’ve seen some serious discounts from some of our favorite points programs. That’s the general mantra Points are transferable such as Chasing the ultimate reward are a little more insulated from depreciation than a hotel or frequent flyer program. At least, points like these can be redeemed at a flat rate.

But even transferable currencies are affected from time to time. For example:

• Bilt Rewards will lose American Airlines as a transfer partner in June 2024, which is a shame because American transfers are one of the most compelling reasons to get Bilt Rewards.
• Chase Ultimate Rewards has lost transfer partners over the years and some of its best partners, like United Airlinesdevalued their loyalty programs.
• Citi ThankYou Rewards points used to be worth up to 1.66 cents on American Airlines flights and 1.25 cents on other travel booked through the Citi ThankYou travel portal, depending on the card you have. Now they are worth 1 cent each.

Devaluations happen so often that it can be easy to forget how many times they have happened over the years. While some changes are worse than others, below is a brief overview of some of the other big changes that have happened over the past few years.

Hyatt added peak and off-peak pricing, moving many properties to higher tiers

Hyatt has managed to remain a bright spot in the world of “free travel,” consistently offering reliable reward rates and great value for its points.

That’s largely still the case, but it continues to grow its portfolio of popular hotels, making Hyatt World Credit CardAnnual free night certificates are becoming less and less valuable. This year, Hyatt announced about 137 hotels and resorts are moving into higher award categories, so it will cost travelers more points to stay at these properties.

More, Hyatt’s recent partnership with Mr & Mrs Smith does not follow the award chart. These hotels are dynamic priceconsistently yielded values ​​under 1.5 cents (markedly lower than average pricing is 1.7 cents each World of Hyatt point). While it’s not the end of the world, it does mark the first time Hyatt has adopted a dynamic pricing policy, which left us a bit confused.

Related: 5 easy ways to maximize your Hyatt redemptions

Marriott removed its award rankings

We think Marriott has weathered the devaluation conservatively. After announcing that they were throwing their awards charts in the trash, they moved to dynamic pricing in 2022. Marriott continued to increase the cap on awards night prices – the previous level was 100,000 Marriott Bonvoy points became 120,000 points and then 150,000 points. (There are also some exotic properties that cost exponentially more, such as the Ritz-Carlton Reserve properties and the infamous estate. North Seychelles Island.)

Alaska Airlines’ award charts are devalued

In March 2024, Alaska Airlines devalues ​​its award rankings regarding longer flights within the United States. For example, economy flights within (or between) the mainland United States, Alaska, and Canada for distances between 2,101 and 4,000 miles increased 40%, from 12,500 miles to 17,500 miles.

United charges too much for many flights to (and within) Europe and Asia

In mid-2023, United Airlines pulled off a surprise increase the prize pool for Europe by a whopping 33%. It’s so annoying, then increased prices to other international destinations up to 122%.

It’s 2024 and United are preparing for a blockbuster year of disappointment. It’s very heavy First class discounts on Lufthansa and All Nippon Airways, charging 28% to 100% more miles than before. Most recently, it increase partner business class award flights in Europe and Asia it appears to have more than doubled in many cases.

Virgin Atlantic makes flying on ANA and Delta Air Lines more expensive

Virgin Atlantic has had some of the best deals in award travel for a long time – but they’re regretting it.

In early 2023, Virgin Atlantic raises ANA First class award prices are up to 42%, making them some of the sweetest points and miles. Then, in late 2023, Virgin Atlantic started charging up to 60% more on certain economy Delta flights and up to 50% more on Delta One (business class) flights.

What about cash?

Even if you collect and redeem points at a fixed value — which is the case when you have cards like Capital One Venture Rewards Credit Card, a popular option that lets you offset paid travel costs at 1 cent per mile — your rewards still lose value over time. The US Bureau of Labor Statistics Estimated inflation over the past 12 months increased by 3.5%.

What if you choose cash from the start? We like to think of our travel rewards as “free,” but you’re sacrificing miles every time you swipe a rewards card instead of a cashback card. This creates an opportunity cost that we can peg at around 2% per dollar spent thanks to tags like Citi Double Cash® Card (see exchange rates and fees), offers 1% back when you buy and 1% back when you pay (actually 2% back everywhere).

If you chose to earn cash back instead of points, you could have invested that money for growth instead of watching your rewards value erode over time. Whether you choose a fixed-value investment like bonds or pursue something riskier (but potentially more profitable) like stocks or real estate, you should consider earning rewards has growth potential for you over time – if not. Plan to spend them in the near future.

How to redeem your points for maximum value

Redeem your points and miles regularly and don’t let your balance get too high. If you find yourself with hundreds of thousands of points but no trips on the calendar, find out when your next vacation is and start planning.

If you’re someone in the enviable position of earning more points than you can spend (thanks to bulk limited time offer), consider sharing your wealth with a friend or family member.

You might even consider switching to one Cash back credit card. It’s possible to have too many points and miles if you can’t spend them fast enough. If you know you can quickly replenish your loyalty account, making money temporarily isn’t a bad decision at all.

Another great form of protection involves diversification. Currencies that carry over to some airline and hotel programs are not immune to devaluation, but they still offer more redemption opportunities if the airline or hotel program makes a drastic change strong. For example, if you have Chase Sapphire Preferred® Card And United MileagePlus announcement of a major devaluation, you can always transfer your points over Air Canada aircraft to book Star Alliance award flights.

So if you don’t already have a transferable loyalty card, now is the perfect opportunity to get one.

Diversification goes beyond credit card rewards. If you often shop through Delta SkyMiles shopping portalPlease consider using it American Airlines shopping portal a few months instead. This will help you strike a balance with another loyalty program, give you more award flight options, and protect your total miles balance from potential Delta devaluations.

Related: Airline credit cards vs travel credit cards: Which is best?

Bottom line

Points and miles can bring you big profits today and negligible profits tomorrow. Simply put, this currency is not for investment.

So live by the “earn and burn” philosophy and get value from your miles before they lose value. If not, take a look at the points you currently have and make sure you have a plan to use them before the next inevitable wave of devaluations hits.