People take different approaches to collecting points. Some rack up points with a specific goal in mind, while others rack up points and almost view it as their retirement account, with no plans to redeem rewards.
Loyalty programs tend to diminish over time. Since this is an issue that many in the points hobby struggle with, I wanted to talk about how you can best use your points to your advantage.
There are some general thoughts on how to avoid devaluations.
Whenever possible, always take an "earn & burn approach" to your points, that's the most important point I can make. I hear a lot from people who say they are earning points for retirement and will redeem them later.
Maybe you can't take time off work, or maybe there are other life circumstances, but not everyone will always be able to redeem. I can't emphasize enough that you shouldn't view your points balance as a retirement account.
What's the reason? Money can be kept in an account without accruing interest. It's worse because your points currency has a higher inflation rate than most "real" currency.
When you compare award redemption rates to what they were a decade ago, you will see that the requirements for award points have gone up.
I want to be able to travel when I'm done working. I'm all for that. The good news is that there are many ways to earn points in retirement.
The good news is that it is easier to accumulate points now than it has ever been, in terms of how many points you can earn per dollar spent on credit cards, in terms of opportunities to buy points, etc.
The rewards you earned in the past are not as valuable as they used to be.
If I am going to rack up points in the long-run, I always prefer for them to be points in a currency other than the US dollar.
I feel more comfortable with points that are not used for a long period of time.
Many of us still earn points for certain airlines and hotels. Having a co- branded credit card makes sense because we rack up points through third party activities.
I am not opposed to collecting airline miles and hotel points, but I try to limit my balance in these programs at certain times. What are the things I consider here?
It's tempting to apply for all of the huge credit card welcome bonuses. You don't want to be passive. Readers who have points balance with 10 different currencies, but don't have enough points with any program for it to be useful, are often the ones I hear from.
What is the best way to deal with this?
Unless you want to change hotels every night, you don't want to be in a situation where you want to visit Paris for five nights.
The strategy with miles and points will be different for everyone. I recommend taking an earn & burn approach when accruing points, instead of viewing your rewards balance as a retirement account.
I try to accumulate points in order to reduce the risk of an award program devaluation. If I am going to earn a specific airline or hotel points currency, I try to keep my points balance small so that I can redeem them quickly if there is a devaluation.
How do you minimize the risk of points being overvalued?