Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / How Inflation Is Quietly Eating Your Travel Rewards Points
Transcript
- Lucas: Alright, I want to talk about something that's probably quietly eating away at your wallet, and you might not even realize it's happening. It's your travel rewards points — the miles and hotel points you've been diligently collecting. Luna: Oh, I've got a feeling I know where this is going. I checked my Delta SkyMiles balance the other day, and the number of miles for a domestic flight seemed... higher than I remembered. Lucas: Exactly. That's not your imagination. The airlines and hotel chains have been quietly devaluing their points. It's inflation, but it's sneaky. The latest CPI reading came in at 334 for May — up from 332.41 in April. That's official inflation. But the inflation inside loyalty programs? It's been running much higher. Luna: So it's like a hidden price hike. How much higher are we talking? Lucas: Let's look at Delta SkyMiles as a case study. Over the past twelve months, Delta has increased the number of miles required for many domestic award flights by 15 to 20 percent. And that's not even counting the dynamic pricing they've introduced, where the miles cost fluctuates based on demand. A flight that used to be 25,000 miles round-trip might now be 30,000 or 35,000. Luna: And it's not just airlines. Marriott Bonvoy did something similar. They introduced peak and off-peak pricing, and a lot of their mid-tier hotels now require more points on peak dates. Lucas: Right. Marriott's changes essentially mean you need to plan more carefully. The worst part? The ten-year breakeven inflation rate — that's the market's expectation for inflation over the next decade — is sitting at 2.20 percent. That's down a bit from last month's 2.21, but still above where it was a year ago. So the broader inflation picture suggests this trend might not reverse anytime soon. Luna: So what do we do? Just burn through all our points immediately? Lucas: Partly, yes. But there's a smarter approach. First, treat your points like a depreciating asset — because they are. Just like cash under a mattress loses value with inflation, unredeemed points lose real purchasing power. So the number one rule is: don't hoard. If you have a trip in mind, book it now, even if it's a year out. You can always cancel if plans change. Luna: But some programs let you cancel for free, right? So you can lock in the current rate. Lucas: Exactly. Delta, for example, allows you to cancel an award ticket for no fee and redeposit the miles. So if you see a good redemption rate, grab it. You can always cancel later if you find a better deal. That's a hedge against future devaluation. Luna: What about transferring points? I know Chase Ultimate Rewards and American Express Membership Rewards let you transfer to partners. Is that a good move? Lucas: It can be, but you have to be careful. Transferring points to an airline or hotel program is irreversible in most cases. So you want to transfer only when you have a specific redemption in mind. And even then, check if the partner has also devalued. Some partners like Air france klm have actually kept their award charts fairly stable, so transferring there might get you more value than using Delta's own program. Luna: That's a good tip. And what about hotel points? Are they as bad as airlines? Lucas: Hotel points are a mixed bag. Marriott and Hilton have both introduced dynamic pricing, but Hyatt has been more restrained. Hyatt's World of Hyatt program still publishes an award chart — that's increasingly rare. So if you have Hyatt points, they're actually holding their value better than most. That's a good data point for listeners who are deciding which program to focus on. Luna: So the strategy is: know which programs are devaluing fastest, and either use those points quickly or avoid earning them in the first place. Lucas: Bingo. And that brings up another point: which credit cards to use for everyday spending. If you're earning 3x points on a card whose points are losing 15 percent of their value per year, you're effectively earning less than 2.55 percent in real value. You might be better off with a simple cash-back card that pays 2 percent, because cash doesn't devalue as fast. Luna: That's a really interesting calculus. So the inflation-adjusted return on points is lower than the headline number suggests. Lucas: Exactly. And if today's conversation helped you think about your points strategy differently, I'll just say: the way this show stays ad-free and independent is through listener support. If you found value in this, you can buy me a coffee — buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash f-e-x-i-n-g-o. It really helps keep these conversations going without any sponsor pressure. Luna: Yeah, and it's a small way to say 'this mattered to me.' We appreciate it. Lucas: Alright, back to the points. One more thing to watch: the Fed. Minneapolis Fed President Neel Kashkari said last week he expects a rate hike this year. If rates go up, it could strengthen the dollar, which might make international travel cheaper — but it also might accelerate devaluation in points programs because airlines will see less demand from foreign tourists and try to compensate by squeezing more from domestic flyers. Luna: So the macro environment feeds into this in a pretty direct way. Higher rates, stronger dollar, more pressure on loyalty programs to extract value. Lucas: Precisely. And the broader trend is clear: the era of cheap award travel is probably behind us. The best defense is to be active and strategic — redeem early, diversify your points, and always calculate the real value you're getting. If a redemption gives you less than one cent per point, you're better off paying cash and saving the points for a better opportunity. Luna: Good rule of thumb. I know a lot of people are sitting on huge balances from pandemic-era travel credits and sign-up bonuses. This is a wake-up call to actually use them. Lucas: Exactly. Don't let inflation eat your points while you're waiting for the perfect trip. Book something — even if it's a weekend getaway — and lock in that value. Your future self will thank you. Luna: Alright, great advice. Next time we'll talk about another hidden inflation trap — this time in your grocery delivery subscription. See you then.