Inflation Is Chipping Away at the Value of Your Credit-Card Points
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What is the main topic discussed in this episode?
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Here's your money briefing for Tuesday, October 1st. I'm J.R. Whalen for The Wall Street Journal. One of the perks of using credit cards is the points you accumulate that can be put toward things like flights or a gift card. But those rewards you've been building up over the past several years don't go as far as they used to.
How is inflation reducing the purchasing power of credit-card points?
Inflation is trending downwards, but prices are still elevated. So when you redeem points within the portal of a card issuer, those points are worth about one cent. But since 2019, a cent has lost a considerable amount of value, about 20 percent of its value.
We'll talk to Wall Street Journal personal finance reporter Catherine Hamilton about what you can do to preserve the value of your points. After the break.
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Why have Americans accumulated a 70% increase in credit-card points since 2019?
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All those credit card points you've accumulated are losing value to inflation. Wall Street Journal personal finance reporter Katherine Hamilton joins me. Katherine, in your story, you write that cardholders built up a stockpile of $34 billion worth of points last year. That's a 70% increase from 2019. How are people accumulating so many points?
There's a few factors at play here. First of all, during the pandemic, a lot of people earned a lot of points and weren't spending them as much because obviously people weren't really traveling during that period. And now continuing onwards, we're seeing higher prices due to inflation. And so people are putting more on their credit cards and then accruing more points from that spending.
Well, speaking of inflation, how are people's points losing value? Isn't inflation trending downward?
How does redeeming points in a card issuer’s portal compare to other redemption options?
Inflation is trending downwards, but prices are still elevated. So when you redeem points within the portal of a card issuer, those points are usually based around one cent. So they're worth about one cent. But since 2019, a cent has lost a considerable amount of value, about 20% of its value. So points are also losing their value at the same rate as a cent.
What's the credit card portal? Where would you find that?
Let's say if you have a Capital One card, you just go to the Capital One site and then you can redeem your cards for a credit statement, gift cards, travel within that site. But then alternatively, you can transfer your points out of that site to a frequent flyer program or another company and redeem your points there.
So if people do transfer the points outside of the credit card site, where should they put those points to lessen the bite of inflation?
The best thing to do is shop around as much as you can. So if you have lots of frequent flyer accounts, for example, you can look at five different airlines and how many points they're requiring you to pay for the same flight. And then you can find the best deal once you look at a few different options.
Credit cards often offer consumers a large block of points if they sign up for a card. Is that helping consumers get ahead of inflation?
Consumers are earning more points than they were five years ago because credit cards are handing out points more liberally when you sign up for a new card or when you spend. But you're also seeing the price of things like flights and hotels increase.
Where should you transfer points to get more value and beat inflation?
And so it's balancing out on both sides how many points consumers need as well as how many they're earning.
But we have seen some airlines change the formula by which travelers can redeem points.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–0:38
2
How is inflation reducing the purchasing power of credit-card points?
0:38–1:23
3
Why have Americans accumulated a 70% increase in credit-card points since 2019?
1:23–2:34
4
How does redeeming points in a card issuer’s portal compare to other redemption options?
2:34–4:12
5
Where should you transfer points to get more value and beat inflation?
4:12–6:39
6
Are sign-up bonuses and generous earning rates offsetting rising travel and hotel costs?
6:39–7:54
Speakers
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