The Perks of Credit Cards and Points

Using credit cards offers more than just convenience—it's a way to earn points that can be redeemed for rewards like flights, gift cards, or cash back. These points feel like “free money” for cardholders who use their cards regularly. However, the value of these accumulated points is not static, and inflation has started to chip away at their worth. As prices rise, the purchasing power of your points declines. It's crucial to be strategic about how and when you redeem them to maximize their value.

How Inflation Impacts Your Points

Although inflation has been trending down in recent months, prices remain elevated compared to just a few years ago. This means that while one point may still technically be worth about 1 cent, the purchasing power of that cent has diminished. According to personal finance experts, a cent has lost roughly 20% of its value since 2019. In the same way, credit card points have lost value as well, making it harder to redeem them for the same amount of goods or services as in the past.

In 2023, cardholders accumulated an impressive $34 billion worth of points, a 70% increase from 2019, largely due to increased spending during inflationary periods. But despite accumulating more points, cardholders are finding that they need more points to redeem for rewards like flights or hotel stays because of inflation-driven price increases. This “earn more, spend more” cycle can be a frustrating reality for those trying to maximize their points’ value.

Be Strategic with Your Points

Given that credit card points are losing value over time, it's important to approach spending them thoughtfully. If you’ve been stockpiling points, now may be the time to start spending them. Experts recommend the “earn and burn” approach—use your points relatively soon after you accumulate them to avoid further devaluation.

Here are a few strategies to help make the most of your points:

• Redeem Early: Don’t let your points sit too long. As inflation erodes their value, holding onto points indefinitely can be a losing game.
• Shop Around: When redeeming points, especially for travel, take the time to compare options. Some airlines or frequent flyer programs might offer better deals than others. Dynamic pricing means that the number of points needed for a flight can vary depending on timing and demand.
• Consider Transferring Points: Many credit card issuers allow you to transfer points to airline or hotel loyalty programs. Sometimes, transferring points can provide better value than redeeming them directly through your credit card's rewards portal.

Points and Dynamic Pricing

Another factor to consider is that some airlines have shifted from a flat-fee model to dynamic pricing for points-based redemptions. This means that the points required for a flight may fluctuate based on demand, timing, and other factors—making it harder to predict how far your points will go. For example, a flight you might have booked for 20,000 points last year could cost you 30,000 points today due to higher demand or increased costs for airlines.

With the ongoing changes in the way points are valued, staying informed and flexible is key to getting the most out of your credit card rewards.

Maximize Your Points Before They Lose More Value

Inflation’s impact on your credit card points means you need to be proactive about how you use them. Waiting too long could cost you, as each year those points buy less than they did the year before. By spending wisely and strategically, you can still take advantage of the rewards you've earned without letting inflation eat away at their value.

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