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Transcript
- Lucas: Let me ask you something, Luna. When was the last time you actually looked at what your credit card points are worth? Luna: Honestly? Probably never. I just book flights and hope for the best. Lucas: That's exactly the problem. And it's the reason I want to talk about how inflation is quietly eating your credit card rewards. Not the earning side — everyone obsesses over points per dollar — but what those points can actually buy you once you've stacked them up. Luna: So you're saying the points are shrinking, just like everything else? Lucas: Exactly. The data from Bankrate and The Points Guy shows that the average credit card point today is worth about 0.67 cents. That's down from 0.86 cents five years ago. That's a 22% drop in purchasing power — worse than the CPI inflation we've seen over the same period. Luna: Wait, so my cash-back card that gives me 2% back is actually worth less than 2 cents on the dollar for every point? Lucas: If you're redeeming for travel, yes. But let's separate the types. Cash-back cards are actually the most straightforward — one point equals one cent if you take the statement credit. It's the travel and transferable points where the hidden erosion happens. Airlines and hotels have been quietly inflating their award prices. Luna: Right, so a flight that used to cost 25,000 miles now costs 35,000. Same seat, higher price. Lucas: Precisely. And to make matters worse, many issuers are also capping how many points you can earn per category or lowering the earn rate on certain spending. You're getting fewer points per dollar, and each point buys less. It's a double squeeze. Luna: So what's the play? Should people just switch to cash-back cards and stop playing the travel game? Lucas: Not necessarily. Cash-back has its own vulnerability: bank interest rates. The Fed funds rate is at 3.63% right now, which means the yield on your savings account is decent. But if you're carrying a balance on a cash-back card at 20% APR, that 2% back is wiped out instantly. The real enemy is the interest you pay. Luna: So you're saying the game is to never carry a balance, regardless of which card you use. Lucas: Exactly. Step one: pay off your statement in full every month. If you can't, don't chase rewards. Step two: use your points sooner rather than later. Hoarding points for a big trip two years from now? That's a losing bet because airlines are moving to dynamic pricing. The award price can change even after you've earned the points. Luna: Dynamic pricing — that's when the airline doesn't publish an award chart, right? They just set the price based on demand and cash price. Lucas: Right. Delta, United, and many others have essentially eliminated fixed award charts. The number of miles you need for a flight can vary day by day. The Points Guy estimates that on average, a mile on Delta is worth about 1.2 cents, but on a peak travel day, it could be 0.8 cents or less. So the same 50,000 miles could get you a $600 ticket or a $400 ticket. Luna: That's a huge swing. So you're literally leaving money on the table by waiting. Lucas: Let's talk about one card ecosystem that might actually be holding up better: Chase Ultimate Rewards. You can transfer points to Hyatt, and Hyatt still has a published award chart with relatively stable pricing. A category 4 Hyatt costs 15,000 points per night. That's a pretty consistent value of around 1.5 to 2 cents per point if the room goes for $250. Luna: So you're saying some programs are better hedges against inflation than others? Lucas: Yes. Amex Membership Rewards and Citi ThankYou are more flexible but more exposed to airline devaluation. Chase has that Hyatt sweet spot that's held value. But honestly, the single best inflation-proof strategy is the sign-up bonus. A 60,000-point bonus that you earn in three months and use immediately is far more valuable than the slow accumulation over two years. Luna: Focus on the bonus, spend the points fast, and never pay interest. That sounds like a solid three-part plan. Lucas: I'd add one more: be realistic about what you're earning. If you're putting $2,000 a month on a travel card earning 2x points, that's 48,000 points a year. At 0.67 cents each, that's about $320 in value. A single sign-up bonus from a $95 annual fee card can get you $600 in value. The math is not subtle. Luna: And if you do carry a balance, the math gets even worse. At 18% APR, on a $2,000 balance, you're paying $360 in interest a year. That wipes out any rewards. Lucas: Completely. So the punchline is: inflation is eating your points, but you can fight back by being strategic. Don't hoard, don't pay interest, and go for bonuses. Luna: You know, this kind of practical advice is exactly why people listen to this show. And it's why we keep it ad-free — no sponsors pushing the latest card offers. Lucas: Absolutely. And to keep it that way, we rely on listeners who find value in what we do. If today's episode saved you from hoarding points for another year, or helped you rethink your card strategy, that's worth a coffee. Luna: Yeah, and it's the smallest ask possible. If it was worth it to you, buy me a coffee dot com slash fexingo. Lucas: Every bit of support goes straight into keeping this show independent and ad-free. Thank you. Now back to the points. Let me give you one more concrete number. Luna: Go ahead. Lucas: The S&P 500 is at 7,483 today, up 1.8% in the last five days. The market is running hot. But your points are not. If you had 100,000 Chase points worth $1,000 in travel value a year ago, they're worth about $850 today — if you're lucky. That's a 15% loss in real value. Meanwhile, the S&P gained about 12% in the same period. The opportunity cost of holding points is real. Luna: So you'd be better off taking the cash back and investing it, even in a savings account yielding 4%, than sitting on travel points. Lucas: For most people, yes. Unless you have a specific high-value redemption planned soon — like a Hyatt hotel or a business-class flight on a transfer partner. But the general rule is: don't let points sit. Use them, or get cash back. Luna: Alright, so my takeaway: check my point balances, see how much they've actually lost value, and then book something — anything — before they lose more. Lucas: Exactly. And if you're in the market for a new card, prioritize one with a strong sign-up bonus and a flexible transfer program. But don't open a card if you're going to carry a balance. The interest will eat you alive. Luna: I think we've given people a lot to think about. Thanks, Lucas. Lucas: Thanks, Luna. And to our listeners — keep an eye on those points. Inflation doesn't take a holiday.