Credit card rewards can be a special treat, like a leftover slice of birthday cake. As nice as it is to have that extra slice tucked away in your fridge, it only has value if you get to eat it.
Suppose you put off eating that cake because you like the idea of saving it for later. Or perhaps you just forgot about it, until you discovered it hiding behind a gallon of milk a couple weeks later — stale or even inedible.
Like that extra piece of cake you were saving, credit card rewards can lose their value if you save them too long. It’s important to use them while they’re still at their best.
[Read: Best Travel Rewards Credit Cards.]
Inflation Steadily Eats Away at the Value of Credit Card Points
Recent years have reminded consumers of the destructive power of inflation. Not only does inflation raise the cost of things you need to buy, but it also erodes the value of your credit card points.
When you look at your credit card statements, it might seem like your points are steadily rising in value each month. As you keep spending, the number of unused points keeps climbing.
The reality, though, is that because of inflation, the value of each credit card point shrinks month after month. That’s because, unlike money in a savings account, credit card rewards don’t earn interest over time. However, if there’s any inflation — and there’s almost always at least some inflation — rising prices steadily reduce the purchasing power of your stored-up credit card points.
For example, if you had earned credit card points worth $100 five years ago, here’s what inflation would have done to the purchasing power of those points by now: As the chart shows, rewards that had $100 worth of purchasing power in 2019 are only worth $79.37 today.
In other words, inflation would have taken an $20.63 bite out of your cake.
Inflation Isn’t the Only Reason Credit Card Rewards Lose Value
Inflation isn’t the only culprit. Credit card issuers or their merchant partners can change the redemption value of your rewards at any time.
In a May 2024 report, the Consumer Financial Protection Bureau noted that travel providers have a long history of devaluing rewards by requiring more miles or points over time for the same services. The report cited an example of a travel rewards credit card program that suddenly increased the number of miles needed to earn a $100 gift card by 25%.
Worse, you can’t always tell in advance how much your points or miles might be worth. According to the CFPB report, credit card travel rewards credit reservation portals sometimes use “dynamic pricing.” This means that they can change the redemption value of your rewards instantly, depending on circumstances.
Travel rewards credit cards aren’t the only ones using this kind of practice. The redemption value of the rewards you earn is not set in stone. The value is what the credit card company says it is when you go to redeem them.
“Many times, policies can change without any notice, so your safest bet is to use your credit card points while you have them,” says Adem Selita, CEO and co-founder of The Debt Relief Co.
Besides eroding the redemption value of points, credit card companies may remove other cardholder benefits at any time. For example, offers such as a free night for holders of a particular hotel credit card or access to travel lounges at airports may be changed or removed.
So, not only do you have to worry about inflation eating away at your cake; the credit card company may take a bite as well.
[Read: Best Dining Credit Cards.]
Use ‘Em or Lose ‘Em: The Limited Shelf Life of Credit Card Rewards
Seeing your credit card rewards steadily lose value over time may be the least of your worries. In some cases, you might completely lose credit card points you earned.
This can happen in three ways:
— Some rewards credit cards give you a limited time to redeem points. If you don’t use them within a certain period, you lose them.
— Rewards card issuers may wipe out your rewards if you cancel your account, rather than providing you some value for them in the form of a refund.
— Credit card companies may revoke points earned during a billing cycle if your payment for that cycle is late.
In its 2023 Consumer Credit Card Market Report, the CFPB noted that each year, consumers lose $500 million worth of previously earned rewards due to practices like those described above.
Doesn’t that just take the cake?
[Read: Best Airline Credit Cards.]
Statement Credit for Rewards Is Better the Sooner You Use It
It’s an especially bad idea to wait long to redeem credit card points if you regularly carry a balance on your card.
If you have a cash back card or other card with rewards that can be redeemed for statement credit, you could use it to reduce your credit card balance and lower interest charges, which can exceed 20%. This strategy maximizes the value of your rewards.
However, this depends on the situation.
“Redeeming for a statement credit is usually the easiest and safest option. However, if you were planning on making a specific purchase from a specific store or for travel, it could be more beneficial and more impactful to use your points,” Selita says.
To find the best strategy for your credit card, you’d have to compare the cash back value with the possible market value of other goods or services you could redeem your rewards for. However, high interest rates certainly create a big incentive to use rewards to pay down your balance.
If you decide to use rewards for statement credit, keep in mind that interest is being charged on carried-over credit card balances every month. So, the sooner you redeem credit card rewards for statement credit, the more money those rewards can save you. This is yet another reason not to hoard rewards.
Also, don’t let earning rewards become an obsession. It’s important not to increase spending just to rack up bigger reward totals. As Josh Katz, CEO of Universal Tax Professionals, puts it:
“Reward programs can tempt you to spend more than you normally would just to earn extra points or bonuses. This can lead to carrying a balance and paying interest, which easily negates the value of the rewards.”
The trick is to maximize rewards for things you were going to buy anyway and get the most value when you redeem them.
Remember that credit card rewards are like leftover birthday cake. You can hold onto them for a little while, but ultimately they’re best used while still fresh.
More from U.S. News
Are Credit Card Rewards Worth It?
How to Get Free Flights With Credit Card Rewards
Can You Pay a Credit Card Bill With Another Credit Card?
Stop Hoarding Rewards: Inflation Is Coming for Your Credit Card Points originally appeared on usnews.com
Update 07/24/25: This story was previously published at an earlier date and has been updated with new information.
