Use up your credit card points now, expert says
President Donald Trump’s proposal to impose a temporary 10 percent cap on credit card interest rates, if enacted, could change many policies for borrowers. These include how credit card issuers decide to evaluate credit card scores.
If you’ve accumulated a significant amount of credit card points, you should probably spend them now, says Nick Ewen, senior editor-in-chief of The Points Guy; but not because of the potential for a 10% interest rate cap, he says.
“This alone is not a reason to spend your points,” says Ewen. “You should spend your points even before this is announced.”
Ewen says credit card points—rewards earned for card spending that can be redeemed for perks like travel, cash back, or merchandise—are funded primarily by fees paid by merchants on each transaction, interest, and sometimes fees paid by cardholders.
This means that a 10 percent interest rate cap could reduce an issuer’s income. To offset this loss of revenue, rewards programs may reduce the amount of points you can earn on the money you spend on the card, increase redemption costs, or offer fewer benefits, Ewen says.
But with all the uncertainty around Trump’s proposal, he says it’s a “fool’s errand” to put a timeline on when the points might start losing value if the interest rate cap is implemented.
Why should you spend your credit card points now?
Ewen says there are two main reasons to spend your points consistently:
- Lending institutions may change their policies
- Points tend to lose value over time
Ewen says hotel, airline, and credit card rewards programs can change their payment policies at any time, and they don’t need to give you advance notice of upcoming changes.
“You never know what the future will bring,” says Ewen. Hoarding points “can really bite you if there’s a significant change in the program you keep them in.”
Ewen says the changes rarely increase the value you can redeem for your points. If your credit card comes with a perk you plan to actively use, whether it’s advantageous redemption rates or options to transfer your points to airlines or hotel loyalty programs, Ewen says it might be wise to take advantage of that benefit now.
Plus, unlike money you deposit into a high-yield savings or investment account, your points don’t earn interest. This means that their real value decreases over time as prices rise; Ewen says that even if flight prices increase, points worth $100 from an airline will still be worth $100 next year.
“The idea of redeeming your points now ensures that money stays in your pocket to be used in other situations,” says Ewen. “Of course you can earn more through spending and other activities, but you won’t see a balance increase by leaving the money there.”
How many points is too many points?
The number of points you should have on hand will vary from person to person, and depends largely on how many opportunities you have to use them, Ewen says. He adds that it can be helpful to save some points for emergencies such as last-minute flights.
It may make sense to have more points for those who travel more than once domestically or internationally in a year. He says less frequent travelers should start thinking about spending their points once they reach the mid- to upper-five-figure range.
It’s very common to see people accumulating points “For a big trip, like a honeymoon,” Ewen says. Note that points can often be redeemed months in advance, and you can rebook and get the difference back in points, especially if flights drop in price, but you should check with your provider first, says Ewen.
If you have enough points for a flight right now, spend your points on that, he says: “It will be your best option.”
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