What’s the best way to redeem credit card rewards? That really depends on who you ask.
Some rewards enthusiasts focus on earning points they can redeem for cash back with ease, whereas others believe they get the most value by using points for premium travel to far-flung corners of the world.
There are also experts who warn against “saving up” a stash of rewards if you want to get the maximum credit card rewards value. One of those experts is none other than Kevin O’Leary (a.k.a. Mr. Wonderful), who recently said that credit card rewards programs devaluations are the reason you should never, ever save up rewards for a future redemption.
Specifically, O’Leary’s message on X said the following:
“Loyalty programs? Don’t fall for the hype. Points are inflating faster than the dollar. What used to get you a flight to Hawaii now barely buys you a carry-on. I sign up for every program — but I cash out the second I get the points. That’s how smart consumers win. The game is rigged against the hoarder. Spend fast, save 2.5%, and never let them keep your value.”
Are credit card rewards rigged?
While O’Leary’s chosen strategy to maximize credit card rewards seems entirely inflexible, he definitely has a point. Most rewards enthusiasts know that rewards programs — and particularly frequent flyer and hotel loyalty programs — have been devalued constantly over the last few decades, and that the average point or mile doesn’t get you nearly as far as it used to.
A few examples:
- Disappearing benefits: While select Chase credit cards once offered 25% or 50% more value for points redeemed through Chase Travel, this benefit was recently replaced with a new “Points Boost” program that only applies to select airlines and hotels.
- Dynamic award pricing: Where most major loyalty programs used to offer award charts that let you know how many points or miles you needed for a redemption, these charts have disappeared in favor of variable award pricing based on demand.
- Higher prices for awards: Many major loyalty programs have slowly increased the prices for award flights and hotel stays over the last few years, including Air France (Flying Blue), Hilton Honors and Marriott Bonvoy, to name a few.
Even cash back earned with a rewards credit card becomes devalued over time due to inflation. After all, a dollar in rewards redeemed today will almost certainly be worth more than a dollar in rewards you redeem a few years from now.
This doesn’t mean that credit card rewards are “rigged” per se. It just means there’s an opportunity cost to consider if you spend months or years building up rewards for a future redemption.
Still, there are times when it is going to make sense to “save up rewards” regardless of your points losing value. If you want to book an international flight award in a premium cabin and it’s going to set you back 50,000 miles, 100,000 miles or more, it could take you months or even years to save up the rewards you need. The same is true if you want to redeem rewards for a non-travel option as well, including expensive merchandise or a lucrative gift card to your favorite store.
So, even if it doesn’t make mathematical sense to save up rewards points, there may be times when “point hoarding” is the only way to get what you want.
How to get the most out of credit card rewards
At the end of the day, the best way to use credit card rewards really depends on what you really want. You can take O’Leary’s advice and focus on earning cash back that you redeem right away. You can also focus on earning travel rewards points that can be redeemed for higher redemption values in the long fun.
These tips can help you unlock credit card value with either strategy:
Be strategic in how you earn rewards
One way to fight against the devaluation of credit card rewards is maximizing the cash back, points or miles you earn on the front end. This entails making sure you have the right rewards credit card for your needs, or one that gives you the most possible rewards for the way you normally spend.
You can also consider pairing up a few different rewards cards to earn more points on all your purchases. For example, get a card that earns bonus rewards in several categories you spend a lot in, then pair it with a flat-rate rewards card that offers more points on regular, non-bonus spending.
Focus on your favorite programs
You can also fight against rewards devaluation by not earning small numbers of points in a bunch of different programs, at least not through credit card spending. Focusing on a few programs you use the most can help you avoid wasted rewards or points that actually expire while also building up your points stash more quickly.
Earning rewards that fall within flexible programs can also help you avoid waste, especially if you opt for programs that let you redeem rewards for non-travel and travel-related options. If you earn points in the Chase Ultimate Rewards program, for example, you can redeem for cash back, statement credits, gift cards, merchandise or travel through the Chase Travel portal. If you carry a Chase travel credit card, you also unlock the option to transfer points to popular airline and hotel programs like Southwest Rapid Rewards and World of Hyatt.
Save rewards with a plan
If you decide to “save up” rewards for a pricey redemption, make sure you only do so with a plan in place. For the most part, this means researching redemption options ahead of time and having an idea of how many points or miles you’ll need for the booking you want. From there, you can focus on credit card rewards strategies that help you earn the points you’re going to need, either through regular spending or through credit card sign-up bonuses.
Once you have the rewards balance required for the redemption you want, be ready to book and don’t delay.
➤ SEE MORE:Should you save credit card rewards?
The bottom line
While credit card rewards tend to be worth less and less over time, you’re still getting something back for each dollar you spend. If you never carry a balance or pay a dime in credit card interest, these rewards can truly leave you ahead — even after you account for any credit card annual fees you pay.
That said, there’s some truth to Kevin O’Leary’s tweet about rewards devaluations and the benefits that come with speedy redemptions. Whether you’re earning cash back or travel rewards for a future trip, hoarding points without a plan is never a good idea.
