How Inflation Is Eating the Value of Your Credit-Card Points

Key Points

What's This?

• Inflation is eroding the value of credit-card points that are converted to dollars, losing about 20% of their purchasing power since 2018.
• Airlines and hotels are changing the points needed to redeem flights and rooms to reflect cash prices that have risen with inflation.
• Experts recommend redeeming points soon after earning them to avoid “pointsflation” and suggest using cards with easily transferable points to get the best deals.

Americans are racking up mountains of credit-card points. Inflation is eroding their value. 

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.

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.

Inflation starts to bite if you redeem your points through a card issuer’s portal, a common way people trade for cash, flights and hotel bookings. A point redeemed in a portal has long been worth about 1 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 spending power of 50,000 card points​adjusted for inflationSource: Labor Department; the companiesNote: Amex numbers are for booking flights. Chase​numbers are for Sapphire Reserve.2018'20300400500600700$800Amex​Membership​RewardsChase​Ultimate​Rewards

Practically, this means that if you 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 conversion rate changes when you transfer 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 average price for an economy flight purchased with points has increased about 19% since 2019, a report from aviation consultant IdeaWorks found.

Michael Faulkner, who works in the insurance industry, says transferred points aren’t taking him as far as they used to. He said the same flight from his home in Chicago to France increased from 60,000 United Airlines points last year to between 80,000 and 90,000 this year. United declined to comment.

He has collected more than 4.5 million points since the pandemic began. He estimates he earns an additional 1.5 million points annually from everyday spending and opening new cards.

“I try not to sit on points,” said Faulkner, 38. “But it’s comforting to have a balance of them because this is how I’ve traveled for 10 years.”

Earn more, spend more

Points balances ballooned when travel spending halted during the pandemic. Now, consumers are racking up points because they are spending more on their cards, thanks to elevated prices.

Companies have typically offered points more liberally over the past few years, rather than increasing the value of rewards to keep pace with inflation, according to Tiffany Funk, president and co-founder of Point.Me, which tracks credit-card reward values. 

Michael Faulkner and his wife, Felisha Faulkner, on a flight to Abu Dhabi that they bought with points. Photo: Michael Faulkner

Opening an Amex Platinum or Gold card will get you roughly twice as many points in 2024 as it did in 2017, according to US Credit Card Guide, which keeps historical data on sign-up bonuses. Other popular cards like the Capital One Venture and Chase Sapphire Preferred increased sign-up bonuses around 50% over that period.

Along with beefing up welcome bonuses, many companies are now giving out points on more purchases, Funk said. Card issuers say that by increasing the number of points they hand out, they are offsetting inflation’s effect on points redeemed within their system.

In tandem, the cost of goods redeemed with points is also going up in many cases. 

Many airlines are now pricing the fares for point users more similarly to how they set the cash value of flights rather than, say, setting all domestic flights at 50,000 points. In 2015, Delta switched its points fares from a flat-price model to dynamic pricing, which bases prices on timing and demand. Other airlines, like American and United, have since done the same. 

For some airlines, this change has increased how many points are needed for a flight. A business-class flight from New York’s JFK airport to London Heathrow costs more than 150,000 Delta SkyMiles now, up from 86,000 on the same day in 2019, according to Point.Me data. 

Dynamic pricing doesn’t always mean flights will be more expensive, but it can make it easier for airlines to raise the number of points you need to buy a flight.

Many airlines are now pricing the fares for point users more similarly to how they set the cash value of flights. Photo: Elijah Nouvelage/Bloomberg News

In September, the Transportation Department launched a probe into how airlines value points. The department, in a separate move, also conditioned its approval of the planned merger between Alaska Air and Hawaiian Airlines in part on the airlines preserving the value of frequent-flier miles, marking the first-ever such protections against travel reward devaluations, it said.

Earn and burn

Redeeming points soon after you earn them helps avoid “pointsflation,” said Nick Ewen, an analyst at credit-card rewards site The Points Guy.

Faulkner said the fact that flights cost more points has altered the way he redeems them. At the top of his wallet are the cards that allow him to shop around and transfer his points to several different partners. 

People who are just diving into credit-card rewards may find the best deals by sticking to cards with easily transferable points, Funk of Point.Me said, because the points don’t convert to cash. If you create several accounts with different partner companies, you can shop around to see which one is offering the best deal. A one-to-one ratio for points is common, so you can transfer 50,000 points for 50,000 frequent-flier miles, for example.

“It’s like investing in a mutual fund rather than picking a single stock,” she said. “You can make the decision when you’re ready to move the points and you’re actually ready to travel.”

Write to Katherine Hamilton at katherine.hamilton@wsj.com