Is It Foolish To Hoard Credit Card Points And Miles?
What do you think? Is it foolish to hoard credit card points and miles?
The short answer is: “yes, in most circumstances”.
In fact, as a minimalist, I would say that it is foolish to hoard anything, really. Unless, that is, you’re hoarding cash and investing it wisely in a reasonable portfolio of stock and bond index funds. Then in that case, it’s perfectly okay to be frugal and hoard cash. Eventually, that cash will compound and you will be able to use that money as a tool to buy your freedom. The freedom to travel and live the life you want.
But let’s get back to the point. About points. And miles.
How To Earn Points And Miles
So how exactly does one go about hoarding points and miles, anyway? You have to earn them!
Most of my friends and colleagues know me as a hobbyist credit card points and miles earner. This lucrative hobby allows me to be an avid travel hacker who scores free (or at least discounted) travel wherever I go. Needless to say, I have a good level of expertise in the game.
Credit Card Sign Up Bonuses
By far, the easiest way to rack up points and miles is to apply for credit cards with huge sign up bonuses. It’s always recommended to start with Chase cards because they have a variety of useful travel rewards co-branded credit cards (Southwest, Hyatt, British Airways, IHG, Marriott, United, just to name a few).
Additionally, Chase has numerous cards that earn Ultimate Rewards, which is their flexible points currency. These points can be used to redeem for cash, travel, merchandise, or transferred to travel partners (which is usually the most rewarding option). Not only are Ultimate Rewards points valuable, they are incredible easy to use.
Chase 5/24
Don’t forget that all Chase cards are subject to the 5/24 rule. If you opened more than 5 or more personal credit cards with any issuer within the last 24 months, you will be denied if you apply for a Chase card.
Currently, the Chase card that earns the most lucrative sign up bonus is the Chase Ink Preferred business credit card. The bonus is 80,000 Ultimate Rewards points. If you’re interested, feel free to use my referral link here.
Manufactured Spending
It’s clear that huge sign up bonuses gets you on the fast track to earning a ton of points.
Another way to earn a lot of points is through manufactured spending. There are plenty of creative, low cost ways to do this. Some of the more notable methods include using credit cards for paying your taxes and buying gift cards on sale.
Why Hoarding Points and Miles is Foolish
Let me be clear. It’s not a bad idea to earn a lot of credit card points and miles. After all, that’s what I do for a hobby.
However, it’s pretty darn foolish to hoard them and not use them.
Here’s why.
Valuable Only if Redeemed
Simply put, hotel points and airline miles by themselves are not worth anything.
Sure, they do have some intrinsic value. But they are only valuable if you can redeem them.
Airline miles in particular have very limited use. You can generally only redeem them for flights or upgrades. And only savvy travelers who know the ins and outs of airline programs can redeem miles at excellent values. This is because saver level award availability is getting scarcer and scarcer these days. Making matters worse, many airline loyalty program websites are not user friendly. They can make it so hard to redeem those miles!
Hotel points are a little more straight forward and easier to use. But still, they are only worth something once redeemed.
Risk of Losing Points
There is a real risk of losing your points and miles.
Have you ever received a gift card and lost track of it? If you don’t use them right away or you’re not very organized, it can be very easy to lose gift cards.
Points and miles are easy to lose track of too. And guess what. A lot of them expire after a certain amount of time. For example, American Airlines AAdvatange miles expire after 18 months of inactivity.
Because of the risks of losing my previous points and miles, I use Award Wallet. It’s a free site that tracks and monitors your loyalty reward programs. It also notifies you when balances change or when your points are about to expire. To me, Award Wallet is like the Personal Capital (affiliate link) of travel rewards.
Risk of Devaluation
Points and miles are vulnerable to devaluation.
Basically, points and miles are a made up currency with an arbitrarily assigned value. And that value can change at the whim of the travel loyalty program.
Take for instance Hilton. Back in the day, the most luxurious top tier Hilton properties could be redeemed for 50,000 Hilton Honors points. Then, some time in 2013, Hilton decide to increase the award redemption for these properties to 95,000 points. That’s a huge devaluation!
Suddenly realizing that you need almost twice as many points for that dream vacation your were planning is not fun.
Opportunity Cost
This one is a big one.
There is a real opportunity cost to hoarding credit card points and miles.
Instead of using your credit card to earn travel rewards, you could have been earning 2% cash back with a credit card like the Citi Double Cash card.
As I mentioned earlier, points and miles are relatively worthless with a real risk of being devalued. Meanwhile, the cash back that you earn could be compounding away in an investment account.
Travel rewards are fun. But cash is king.
When it Actually Makes Sense to Hoard Points and Miles
Hoarding points and miles is okay when you have a specific travel award in mind and you have a concrete plan on how to redeem them.
For example, let’s say that you really want to fly Singapore Airlines Suites from New York to Frankfurt for your honeymoon. If you find saver level availability, that would cost you 76,000 Singapore Krisflyer miles per seat. For two seats, you will need 152,000 miles.
So in this case, you would hoard enough credit card points to transfer 152,000 points to the Krisflyer program, then redeem those miles for your first class seats in the suites. This is an oversimplification of the process, but it illustrates the point.
It may also make sense to hoard specific points that are flexible.
The most notable flexible banking points include Chase Ultimate Rewards, American Express Membership Rewards, and Citi Thank You points. These points are valuable because of their flexibility. They are also very simple to use. In addition, they have a true intrinsic value because they can readily be converted into cash.
Am I Hoarding Points and Miles?
Well, let’s see.
The funny thing is, I kind of am hoarding points and miles.
A lot of them
Here is what I have:
- Chase Ultimate Rewards: 416,216
- American Express Membership Rewards: 242,665
- Citi Thank You: 121,722
- Hilton Honors: 657,020
- Marriott Rewards: 69,987
- IHG: 104,601
- Hyatt: 24,794
- Southwest Airlines Rapid Rewards: 136,807
- American Airlines AAdvantage: 165,286
- Alaska Airlines Mileage Plan: 31,154
- Singapore Airlines KrisFlyer: 3,456
- Delta Sky Miles: 2,340
- United Mileageplus: 1,195
- British Airways Executive Club: 1,066
- JetBlue TrueBlue: 1,932
Grand total: 1,980,241 points and miles
My balance of flexible banking points alone is worth at least $7,806.03 considering they can readily be redeemed for one cent per point.
But if you considered the reasonable redemption value (according to Frequent Miler) of all of my points, it would come out to be about $28,000.
Not too shabby.
Final Thoughts
So why am I hoarding all of these points and miles?
In the past, I’ve been used to earning about a million points and miles a year. I would then use them up relatively quickly for travel reward redemptions. In the points and miles hobby, this is known as “earning and burning”.
But this past year, we haven’t traveled much. This is primarily because in early 2018, we welcomed a little baby. And anybody who has kids knows that traveling with a baby ain’t easy. In all of 2018, the only place we traveled to was Orlando.
I did a lot of earning. But very little burning.
But don’t worry folks. There’s no way I am letting my points and miles devalue and go to waste.
I can think of plenty of ways for me to use them in the near future. The wheels in my head are turning and I have a lot of fun ideas.
So stay tuned.
I’ve been wondering this myself lately. I have the chase preferred card, and have considered trying to get the American Express Platinum card for the travel rewards that are offered there.
We used the majority of our sign up points for a flight to the DR coming in June, but have built up some more since then. Instead of using those, I might use the sign-up points from the Am-Ex card if we decide to get one.
I will say after getting the cards, we haven’t done as good of a job tracking our spending. That can get dangerous quick. So, we need to get back to our roots!
TPP
Oh yeah. It’s definitely easier to lose track of spending when you have a bunch of cards and you have spending bonuses to meet. My trick is to use the cards on expenses I would have spent on anyway. The biggest one being taxes.
I used to have the Amex platinum. It was great when we were traveling a lot a few years ago. But since we don’t travel as much anymore, I canceled it because I couldn’t justify the hefty annual fee (which went up even more recently).
Don’t taxes pretty much negate the cash back scheme? I checked that out with my card and the excess charge for “charging it” virtually equaled my cash back savings. So I just wrote a check.
Yes. You’re correct. The online payment service provider with the lowest fees is http://www.pay1040.com and those fees are 1.87%. So if you’re using a 2% cash back card, the gain in cash back is only 0.13% which is minimal. Pretty much a wash.
However, in order to maximize rewards, I would open up two (sometimes more) new credit card cards a quarter to earn lucrative sign up bonuses.
To make it simple, let’s say I open four new cards and for each of them, the sign up bonus is earning $500 after spending $5,000. And let’s say my Federal quarterly estimated income taxes is $20,000.
I would divide my payments evenly with each card. $5,000 x 4 cards. I would hit the requirement to earn the bonus for all 4 cards… and so I would earn $2,000. Of course, I would have to subtract the fee, which would be 1.87% of $20,000 or $374. So net profit would be $1,626.
Only problem is you have to sign up for multiple credit cards, some of which may have an annual fee. Though many times you can try to get the bank to waive the annual fee if you’re lucky.
2 million points? Wowzers! Can you sell those on Ebay? 🙂
I need to do better with my travel hacking this year, I’m just a minor league player. I have a good Visa FlexPerks card that gives me great rewards, but I’m not making use of sign up rewards and turning cards. Probably going to do a few this year
Hahaha. Actually there is a market place for buying and selling points and miles.
They can generally be bought at points.com. But the prices are usually quite a bit more than the value you can redeem them for.
You CAN sell miles. It’s not illegal. But technically, it violates the rules of most (maybe all) frequent flyer and loyalty programs. There are brokers who are willing to do it for you. But if you get caught, you risk being shut down by the program and you’ll invariably lose all your points.
Interestingly, you can also donate points and miles to charity. But it makes more sense to donate money because of the greater tax benefits since the valuation of points and miles are generally poor.
Holy moly, that’s a lot of points. I’m in the earn and burn camp.
But we don’t earn that much either because we’re not good at manufactured spending.
Last year was the exception. I used the cards to pay for estimated taxes. That worked out really well. This year is going to be different. I won’t have to pay much estimated taxes because I’m not earning much. Oh well. I’ll keep trying to earn more points.
Yeah. Because I have a high earned income, I pay A LOT in taxes. It’s in the low 6 figures! This makes it very easy for me to manufacture spending in order to earn more credit card reward points and miles.
I’m in the earn and burn camp too. Except this past year 😉.
Not having to pay much in taxes can be a good thing. I suppose you could go the gift card route to manufacture spending, but it’s more time and effort compared to what it’s worth 😀.
I feel personally attacked! I def hoard the Chase Sapphire ones and SPG ones, too. SPG because they are so difficult to earn. And I have only used Chase Sapphire points for flights, and not hotels.
Although I really need to get my travel spend down this year, so I may be going for sub-optimal redemptions after all. I might use the Chase points for car rentals and to cover hotels after all.
My general issue with points have been waiting too long to redeem them (like, a matter of days the award I want disappears), but I think this is really on me and not on the hoarding points factor.
Yeah. Chase and SPG points are so valuable. Although I think SPG points have become less valuable after the merger with Marriott.
Lol. Suboptimal redemptions are fine. Can’t always get outsized value from our points 😀
Thanks for the article on this topic.
I use my Southwest miles to redeem flights whenever I can as they are very easy to use, and it’s the airline which I fly the most and accumulate the most miles.
I cashed in a big slug of Chase points to buy three RT flights to London for spring break last year, purchased on their portal for maximum value.
I have been accumulating Marriott points for at least ten years and have over 350,000. I keep thinking that I will use them to take a “Big Trip” but whenever I do, it seems to be to places where I do not have good Marriott options. I have noticed steady devaluation of these points over time, with increasing number of “Hotel categories”, requiring more points for even the so-so places. I probably should just use these for ordinary trips – family visits and weekend getaways as the value is surely dropping over time.
Yeah. It’s sneaky how they add additional hotel categories to devalue their points.
I totally get it that the Marriott and other chain hotels never really have good options for the places I’m visiting. It happens to me too.
My best use for hotel points are:
1) last minute stays. The point redemption is the same. But the paid cash prices for the same room could be high due to it being last minute.
2) hotel stays in which it’s more convenient to stay close to an airport (such as an early flight the next day)
3) ultra high end hotels (JW Marriott, Conrad, Ritz Carlton, etc) where I can get outsized value for those points. I would never pay cash for those places 😀
You really have a gift for this. Wow. That is an amazing amount of miles you are sitting on.
I have pretty much always redeemed any credit card points into cash. But I am probably short changing myself quite a bit compared to you.
Great tip on award wallet
Yes, award wallet is great! And nothing wrong with cash. It’s king and fungible 😀
I’ll have to check out award wallet, thanks for the tip DMF! Partly thanks to your example, we are looking to travel hack four economy flights for a big summer trip using Chase points.
Keep enlightening us, your unwashed masses!
Thanks for the lessons,
CD
Ooh how exciting. I’m sure it’ll be a wonderful summer trip. You take amazing pictures 😀