Everyone takes a different approach to collecting miles and points. Some accumulate points with a specific goal in mind, while others accumulate points and treat it almost like their retirement account, with no plans to redeem rewards anytime soon.
The problem, as we see too often, is that loyalty programs tend to devalue over time. In this article, I wanted to talk specifically about the best way to diversify your points and avoid devaluations, as this is an issue that many points hobbies struggle with.
Below are some general thoughts on how to diversify your miles and points and avoid devaluations, in no particular order.
Earn and burn, don’t treat points as your retirement account
I think that’s the most important point I can make – whenever possible, always take a “win and burn” approach to your points. I hear people say all the time, “I’m earning points for retirement, and I can’t wait to redeem them all afterwards.”
Now let me of course recognize that not everyone will always be able to redeem – maybe you can’t miss work, or maybe there are other circumstances of the life. However, I can’t stress enough that I wouldn’t recommend treating your points balance as a retirement account (well, unless you’re retiring shortly).
Why? Keeping points in an account for the long term is like keeping money in an account without earning interest. It’s even worse than that, because there’s a good chance that your points currency has a higher inflation rate than most “real” currencies.
When you compare today’s rewards redemption rates to what they were a decade ago, you’ll find that in many cases, rewards point requirements have increased by nearly 100%.
Some may say “but I want to be able to travel when I retire”. That’s great, I totally agree. The good news is that there are plenty of opportunities to earn points effectively, and these will (hopefully) still exist in retirement.
Although points devalue over time, the good news is that it’s also easier to earn points than ever before, in terms of the number of points you can earn per dollar spent on credit cards, terms of opportunities to buy points, etc.
So while the rewards you earned in the past are worth less now than they were then, there are still plenty of amazing opportunities out there.
Earn transferable points whenever possible
Although I take an “earn and burn” approach, I will say that if I want to accumulate points long term, I still prefer it to be transferable point currencies, whether it’s points with Amex Membership Rewards , Capital One, Chase Ultimate Rewards or Citi ThankYou.
Why do I feel more comfortable accumulating transferable points without short-term use?
- As the name suggests, points can be transferred efficiently to various other airline and hotel programs, so you’re more protected from devaluations than when earning points with a single program.
- For several years, I have valued all major transferable points currencies at 1.7 cents each, unlike airline and hotel points currencies, where I have found the value to decrease over time; Admittedly, the same valuation doesn’t really help keep up with inflation, but it’s better than nothing
- Chances are that if you max out your travel credit card rewards, you’ll earn one of these point currencies, so points are also the easiest and most convenient to earn; this could be with cards like Capital One Venture X Rewards Credit Card (review), Chase Sapphire Preferred® Card (review), Citi Premier® Map (review), etc.
Protect yourself from devaluation with airlines and hotels
Granted, many of us still earn points with airline- and hotel-specific loyalty programs. This may be due to our natural travel habits, because it makes sense to have a co-branded credit card, because we accumulate points through third-party activity, and so on.
Of course, I’m not opposed to collecting airline miles and hotel points, but I do try to limit my balance in these programs at all times. What are my considerations here?
- I try not to have more points on an individual account than I could reasonably redeem for a few ambitious trips; that way, if there is notice of a rewards price change, I can book trips to get the most out of my points
- I try to focus on getting rewards with reliable programs. this may include those that have a history of giving advance notice of price changes and programs that publish reward prices, rather than having dynamic prices (for example, programs like Air Canada Aeroplan and World of Hyatt)
- Be careful when accumulating points in a program that only has one ideal point for rewards; if this redemption is devalued, the reason you earned points may no longer apply (e.g. redemption of Virgin Atlantic points on All Nippon Airways)
Be Strategic About Which Point Currencies You Earn
There are so many huge welcome bonuses on credit cards these days, and it can be tempting to claim just about all of them. The thing is, you always want to be strategic. Often I hear from readers who have a points balance with 10 different currencies, but don’t have enough points with a program to make it worthwhile.
So what’s the best way to handle this?
- The beauty of collecting transferable points is that they have many overlapping transfer partners, which means that in many cases you can redeem Amex and Chase points for the same exchange.
- If you’re earning a specific airline or hotel points currency, I recommend having a general goal in mind and then earning enough points to redeem for that.
You don’t want to be in a situation where you’re looking to visit Paris for five nights, and have 80,000 Hilton points, 30,000 Hyatt points, 100,000 IHG points, 40,000 Choice points, etc. (well, unless you want to change hotels every night).
At the end of the line
Everyone’s strategy with miles and points will differ depending on their own situation. In general, I highly recommend taking an “earn and burn” approach when accumulating points, rather than treating your rewards balance as a retirement account.
I try to mitigate the risk of any devaluation of the rewards program by accumulating transferable point currencies whenever possible. If I’m going to earn a specific airline or hotel points currency, I try to keep my points balance small enough that I can redeem almost all of those points several months from now in the event of a devaluation.
What is your strategy for diversifying points and minimizing the risk of point devaluation?