An important reminder: Why you should never hoard points and miles
Over the past few weeks, American Airlines has been freezing or shutting down a number of people's AAdvantage accounts for reported violations of the programs terms and conditions. American Airlines declined to comment on the specific situation, but the shutdowns appear to center around customers using targeted credit card offers that were not intended for them.
A friend of mine reached out to let me know that he was alarmed by this situation. He frequently flies with American Airlines and has over 500,000 AAdvantage miles in his account right now, worth about $7,000 based on TPG's valuations. As of now his account is fine, but he is worried about the possibility that his account could be shut down and he would forfeit those miles. While there are plenty of lessons to be learned here (including that it's always a good idea to stay inside the lines and abide by the rules of the loyalty programs you're involved with), the one thing that immediately jumped out to me was the importance of not hoarding your miles.
It's hard to draw a clear line in the sand to define what constitutes hoarding, but if you have over 500,000 miles in a single program sitting idly in your account with no current travel plans, you might want to rethink your earning and burning strategy. Here are a few reasons why.
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Why you shouldn't hoard points and miles
If you were at a dinner party and one side of the table was talking about economics and the other side was talking about points and miles, you might have a hard time figuring out which was which. Either group could be talking about which currency they're most bullish on this year, or whether certain things are valued correctly in the "market." Another important similarity: Just like the purchasing power of a dollar erodes over time due to inflation, so too are points and miles an awful long-term store of value.
Related: Why points and miles are a bad long-term investment
If you zoom out and look at the last five to 10 years, nearly every major points and miles currency has been devalued at least once, with some having seen 50% or more of their value erased. If you're newer to the world of award travel it might be hard to understand just how certain of a thing devaluations are, but here are a few examples:
- In 2016, American Airlines severely devalued the AAdvantage award chart, raising prices by tens of thousands of miles across many routes. Prior to this change, a Cathay Pacific first-class award from the U.S. to Hong Kong cost 67,500 miles. Now, it's 110,000 miles.
- In 2015, Delta removed its award chart and became the first of the major U.S. airlines to switch to dynamic pricing. Now you don't know how much an award costs without searching for that specific day, and we've seen plenty of one-way business-class awards pricing out at over 400,000 miles. United and American have since followed suit to varying degrees, reducing the value of each airline's miles.
- In 2016, Alaska Airlines raised its prices for Emirates first-class award tickets overnight by as much as 100%, with no notice whatsoever.
If you've had a large stash (say, 500,000 miles or more) in any of these "currencies," these devaluations would have taken a large bite out of your purchasing power. These are three extreme examples, but there are dozens of smaller devaluations that take place every year. This is why "earn and burn" has become the mantra of serious award travelers. The longer you hold on to your points, the greater the chance they'll be devalued, potentially leaving you underwater (i.e. your points are worth less than what you paid to acquire them).
Related: The best travel rewards credit cards
Transferable points can help ease the pain
One way to mitigate this and slow the inflation rate of award prices is by holding transferable points currencies instead of individual airline miles or hotel points. When Delta switched to dynamic pricing, customers who had focused on collecting American Express Membership Rewards points could still transfer them to Air France-KLM Flying Blue to book SkyTeam awards, or to Virgin Atlantic to book Delta awards at much lower rates.
Related: TPG Points Lab: Save miles booking Delta awards with Virgin Atlantic
Unfortunately, this only works up to a point (yes, pun intended). The way Chase Ultimate Rewards has changed in the last few years provides a perfect example of this. Ultimate Rewards are still one of the most valuable points currencies. At 2 cents each, they sit near the top of TPG's valuations list thanks to 11 airline and three hotel transfer partners. About three years ago, when I was really starting to ramp up my points and miles strategy, Ultimate Rewards were my go-to currency.
Now, my most frequent award redemptions are for premium-cabin flights between the U.S. and Asia, so it really stung me when Chase dropped Korean Air as a transfer partner. Add in United's recent switch to dynamic award pricing, and Ultimate Rewards have lost some of their luster in my book. It's been a slower and smaller drop, since there are still plenty of great transfer partners (including Virgin Atlantic, Hyatt and Singapore KrisFlyer), but the devaluations to individual programs have trickled up to transferable points as well.
Related: Maximize your wallet with the perfect quartet of Chase cards
What to do if you have "too many" miles
This is by no means an indictment of people who work hard, use the right credit cards, and manage to rack up hundreds of thousands of miles. At the time of writing I myself have a little over half a million miles spread out across various programs. All I'm saying is I'm not impressed by massive account balances. After a certain point, there is such a thing as too much. Or to put it another way, the least valuable mile in your account is the one you never redeem.
If you're sitting on a large stash of points and miles with no current plans to spend them, then take a trip! Be spontaneous, upgrade to business or first class or stay in a nicer hotel than you normally do. And if you have millions of miles, there's no reason for you to ever be paying (relatively more finite) cash for your own travel, even at lower values. Get over the analysis paralysis and start redeeming — it doesn't matter if you're scoring the perfect redemption every time.
If your schedule is too busy or you don't have enough vacation time, consider gifting some points and miles to a family member or friend. Host a family reunion and use your points to cover everyone's flights, or send your parents on a luxury trip to somewhere high on their travel bucket list. Points and miles are all about creating lasting memories, and they can't do that sitting unredeemed in your account.
For those lucky people who are already doing all the above (i.e. frequently traveling for free in premium cabins and being generous with their friends and family) and still racking up more points than they can spend, there is one other consideration to make: Switch your earning strategies to focus on cash back. Time is the most limited resource for all of us, and there comes a point where having more miles doesn't enable you to travel more. In that case you can move your credit card spending to a cash-back card and pad your bank account instead of your frequent flyer account.
Related: The best cash back credit cards
Bottom line
It shouldn't take a wave or surprising account shut downs to get you thinking seriously about your redemption strategy. Earning points and miles is only half the game, and for most people, it's the easier half.
As much as we'd like thinks to stay the way they are forever, the world of award travel is fast paced and changes often. Sweet spots die and new ones pop up to take their place. If you're currently sitting on hundreds of thousands of points and miles, it's time to start planning a vacation for you or someone you love — and if that's not something you're able to do, you might seriously want to consider switching to cash back instead.
TPG featured card
Rewards
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Intro offer
Annual Fee
Recommended Credit
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.
Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Intro Offer
You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.