NEW YORK—Will issuers have to reconsider their rewards points offerings due to inflation?
A new report from the Wall Street Journal points out that as Americans amass huge credit card points totals, their value is slipping.
Cardholders built up a stockpile of points worth more than $34 billion in 2023, up 70% from 2019, according to annual reports from card issuers American Express, Capital One and JPMorgan Chase, the Journal said.
“But hoarding credit card points is sort of like stuffing cash under a mattress. While cash in the bank or stock market can earn a return that offsets inflation, credit-card points can’t be invested,” the Journal noted.
Inflation begins to eat away at points values when cardholders redeem points through an issuer’s portal, a typical way people trade for cash, flights and hotel bookings, the Journal explained.
Less Than One Cent
“A point redeemed in a portal has long been worth about one cent, according to the credit card issuers, and a penny has lost about 20% of its purchasing power since 2018, according to the Bureau of Labor Statistics. So those points have lost roughly the same,” the Journal said.
So, if a consumer accumulated 50,000 Capital One points in 2020 and still haven’t spent them, they are now worth about 41,300 points within the bank’s portal, the Journal said.
The conversion rate changes when someone transfers points out of that portal and into a frequent flier or other points program.
“Airlines and hotels have their own systems of valuing points, but many are changing the amounts needed to redeem flights and rooms to reflect cash prices that have risen with inflation,” the Journal said.
The average price for an economy flight purchased with points has increased about 19% since 2019, a report from aviation consultant IdeaWorks found, the Journal noted.