Points Panda has partnered with a variety of financial companies including CardRatings for our coverage of credit card products. Points Panda and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. For more information please read our full Advertiser Disclosure.
You always have to move quickly in the travel hacking industry. A lot of people save their miles thinking they can keep them for a couple of years to redeem bigger and better rewards.
People should know however, points and miles follow basic economic principles – YOU NEED TO SPEND THEM. Hoarding your miles is probably the worst idea ever!
Why Hoarding Points Is A Big NO In Travel Hacking
Hoarding your points is like keeping your life savings in a piggy bank – it just sits there and becomes prone to inflation. If you don’t know what inflation is, it’s basically a decrease in someone’s purchasing power due to prices naturally increasing over time.
Let’s say your one dollar can buy a dozen eggs this year, but in the next five years, the prices for eggs will have increased. This is why financial advisers don’t advise people to just save their money, but they do advise people to invest their money.
It’s the same case for your points and miles because they also lose their value (devaluation) if you don’t spend them. Credit card sign-up bonuses and perks will also be reduced because more people are getting into the travel hacking game.
However, what is worse is that companies control the devaluation of points, unlike inflation that is controlled by external economic forces. For example, Delta Airlines can set one mile to be valued at 2 cents for domestic flights today, but next week, it can opt to lower it by 30%. Airline companies can do this whenever they want to, and they don’t need to inform anyone about the changes.
Devaluation Cases That Happened In The Travel Hacking Industry
Ask any travel hacking dinosaur (people who have been in the industry for decades) and they’ll no doubt have stories of the good old days when the benefits were double or even triple of what credit card companies are offering now. For example, IHG credit cards offered a “free anniversary night” about three years ago, where cardholders can redeem a free stay at any IGH hotel.
There are other examples where devaluation has happened and here are some of them:
- Delta switched to dynamic pricing back in 2015 which means that it doesn’t use an award chart anymore. They have the freedom of setting the prices of their redeemable flights without even notifying its members. Today, you need to go to their website and find out how many miles a flight costs.
- Southwest Airlines also devaluated its points currency back in March 2014. Rapid Rewards devalued its points from 1.67 cents to 1.43 cents on their Wanna Get Away flights.
- Back in 2016, American Airlines raised the prices of its flights in its AAdvantage award chart. A first-class U.S. to Hong Kong flight only cost around 67,500 miles, but now, it’s about 110,000 miles.
- In November 2019, United also adapted dynamic pricing for its MileagePlus awards program.
These examples mentioned above are the reasons why travel hacking veterans follow the “earn & burn” principle. Stop holding onto your miles because you think there will be better rewards that you can redeem in the future.
What Points Panda Recommends
Profit is the main reason why Airline companies exist, and it will always be that way. Sure, they are customer-driven too, but do keep in mind they come up with enticing sign-up bonuses and perks to lure you into getting a credit card.
Once you’ve signed up, they will slowly devalue the rewards that you earn. If they start to lose customers, they will start to come up with big offers again and the cycle continues.
Our advice to travel hackers is to always spend your points whenever these offers come out. There’s a big possibility that these offers won’t happen again in the near future.