What Does a Points Devaluation Mean?

Loyalty programs are vital to keeping customers coming back to a business. In a 2022 McKinsey survey,¹ 59% of respondents said they were more likely to choose a brand over its competitors after joining its loyalty program.

While important, these programs are a significant expense. Companies spend billions per year running loyalty programs, along with eating the expense of the free goods and services distributed. And when those points have become too expensive, they could experience a devaluation.

Brands enact devaluations for several reasons, but mainly to ensure their corporate balance sheets don’t have too much risk.

But the real risk is on the part of consumers. If you’re regularly earning rewards, you should strive to spend them. This doesn’t mean wasting them, but if you can choose between a decent redemption of your rewards or using your hard-earned cash, I would almost always advise you to choose the former rather than the latter.

Here’s what you need to know about devaluations, how they work, and what you can do to fight back.

Why Brands Devalue Their Rewards

Whether it’s your airline loyalty program or your credit card rewards program, brands regularly analyze how many points or miles are currently in circulation to be redeemed. This sits as a liability on a company balance sheet because, at any time, these could be redeemed, hurting a business’s profit for that month or quarter. Now, we know that a large amount of rewards end up going unused. The figure is hard to pinpoint but is estimated to be in the hundreds of billions of dollars. But regardless of whether they’re redeemed or not, they are an outstanding liability that businesses need to account for.

So, how can a business easily reduce that risk? By reducing the value of the points by requiring more points for redemption. They can do this at any moment, without any notice to the end consumer.

What Loyalty Program Devaluations Look Like

Airline and hotel loyalty programs typically devalue their rewards to prevent their programs from becoming a large liability.

Qatar Airways Privilege Club recently increased the cost of awards on Alaska Airlines business class flights from Los Angeles (LAX) to Seattle (SEA) from 16,500 Avios one-way to 27,000 Avios one-way. This 60% increase in price dropped the value of each Avios on this route.

The Hyatt Centric Waikiki Beach moved from Category 4 to 5 when the World of Hyatt loyalty program made its 2024 category updates. This means it now takes 5,000 more points to grab a free room and the loss of redemption opportunities for Category 1-4 free night certificates.

Other devaluations from ANA, Avianca, British Airways, Delta, Hilton Honors, Turkish Airlines, Virgin Atlantic, and Wyndham have made headlines recently.

How You Can Fight Back

It’s never fun to hear that the rewards you work hard to earn are now worth less. Given that this can happen with little notice, the onus is on consumers to be proactive with their rewards.

First, don’t hoard your points and miles. The point isn’t to amass millions of points and miles to brag but rather to save your money and create experiences you may not have otherwise had. Additionally, by holding onto a large amount of points, you’re more susceptible to a devaluation. For example, if you have a mere 10,000 Delta SkyMiles (worth about $120 according to our valuations), a 10% devaluation wouldn’t be that bad. However, if you had 150,000 Delta SkyMiles (worth $1,800), or even more, a devaluation could be disappointing. So the point (pun intended) is to use your rewards as regularly as possible without being wasteful by doing something like purchasing a magazine subscription with them.

Second, diversify what kind of rewards you earn. Let’s say you only earn American Airlines AAdvantage miles using one of the co-branded American Airlines credit cards because you primarily fly American. If you have 400,000 AAdvantage miles (worth $5,600), a 15% devaluation could impact the value you earn from your spending and what you could redeem the miles for.

To avoid a devaluation, you might consider 1 of 2 options:

1. Use credit cards with transferable points
2. Earn airline miles with alliance partners to redeem for your preferred airline

Several credit card loyalty programs, including American Express Membership Rewards, Chase Ultimate Rewards, and Capital One Miles, offer rewards that can be transferred to a host of airline and hotel loyalty programs. Earning transferrable rewards means you protect yourself from potential devaluation.

If you are loyal to a specific airline but want to diversify your rewards, you may be able to earn miles elsewhere to redeem on your airline of choice. For example, if you love flying with United Airlines, you could earn points with the Aeroplan^® Credit Card since Air Canada and United are both part of the Star Alliance. If you love American Airlines, you could earn Avios with the British Airways Visa Signature^® Card and redeem them on American. By utilizing this strategy, you can continue to remain diversified in case an unexpected devaluation happens.

Final Thoughts

Points and miles aren’t meant to be kept but rather redeemed. If you find yourself with a large sum of points, you may want to look into ways you can redeem those points for travel. The longer you hold onto those points, the more likely it is they will become devalued.