If you like to travel and you’re not saving up airline miles or credit card reward points, you should. If you already are, be careful with how long you hold onto them. Saving up points for that dream vacation might sound exciting, but I know one word that will ruin all your plans: devaluation.
Mile and points have a certain cash value based on the program you’re earning and saving them through. For example, a $400 plane ticket could be purchased for 25,000 points, making each point worth about $0.016. It’s not a lot, but if you save up enough of those points through normal trips and purchases, you can use them to get tons of free stuff. Problem is, points don’t always hold the same value, so they make for a pretty terrible investment.
As reward expert Ben Schlappig of the One Mile at a Time blog explains, holding a large mile or point balance is a risky strategy. Those miles and points will likely devalue massively over time. Those points that were once worth $0.016 could suddenly be worth $0.008 whenever the company offering the rewards deems it so. Not only that, but points and miles can expire, or programs can change in such a way that the rewards you’ve saved up become worthless. To give a real-life example, here’s a reward-saving horror story that was recently featured at The Points Guy:
“In one night, Qatar Airways turned me from Qmiles royalty into a pauper. After reading your article about Qatar’s silent devaluation, I rushed to the Qcalculator to see how the cost of awards had changed, and it turned out to be even worse than I had feared. The CGK-ORD route I usually fly used to cost 190,000 miles in business class, but now it costs 391,000 miles. That’s a 106% increase! The worst part is that I have 300,000 hard-earned miles stashed in my account, which I accumulated over three years. I intended to treat my parents to a vacation to the US next year in QSuite, and while previously I was only 80,000 miles short of my goal, now I can’t even afford to fly one person.”
Just like that, his points had lost half their value! Sends chills up my spine. How do you avoid problems like that? For one, be mindful of the rewards program’s terms and conditions, and look into how often the company switches things up. Also, Schlappig says it’s best to have an “earn and burn” philosophy when it comes to miles and points. Only bank points for what you plan to use in the next year or so. Anything beyond that and you’re running the risk of the dreaded devaluation demon coming and wrecking everything.
