What You Should Know About Rewards Devaluation

Discussion in 'General Discussion | Miles/Points' started by sobore, Apr 18, 2012.  |  Print Topic

  1. sobore
    Original Member

    sobore Gold Member

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    http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/04/17/investopedia6616.DTL

    Imagine opening a travel rewards credit card with the intention of using the points or miles gleaned over the course of the next year to pay for a family vacation, only to see excitement turn into disappointment when the number of points or miles required for redemption rises inexplicably, making the trip unattainable. Such an unfortunate scenario not only contributes to the fact that one-third of all the rewards points or miles issued by American companies each year go unused, according to a joint study from Colloquy and Swift Exchange, but also begs two important questions: 1) Why does this "rewards devaluation" occur and 2) How can it be avoided?
    Rewards Devaluation Explained Simply put, rewards devaluation is when the number of miles or points needed for certain rewards increases, thereby making already-earned points or miles less valuable. Rewards devaluation can occur whenever you earn rewards in terms of a virtual currency (e.g., Hilton Points, Citi ThankYou Points, Delta Miles, etc.), which means that it's relevant to all types of loyalty rewards programs, including those tied to airlines, hotels, retailers and credit cards.
     
  2. mrredskin
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    mrredskin Gold Member

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    props for the biggest culprits of point devaluation being mentioned in the 2nd paragraph!
     
  3. Len Williams
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    Len Williams Silver Member

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    Down with devaluation!
     
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  4. PointsCashMiles

    PointsCashMiles Silver Member

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    I find it Interesting that the article concludes that the Capital One Cash Credit Card offering 1.5% cash back is the best consumer card for those worried about devaluation - I'm pretty sure we could come up with a better option here at MP. I have to wonder why the author wouldn't just conclude in general that cash back cards are better than miles / points cards if one is concerned about devaluation - It makes me feel like the author is a shill for Capital One. The only thing missing is some affiliate links to sign up for the cards.
     
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  5. tommy2tone

    tommy2tone Active Member

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    Brilliant!

    I thought it was just me when I joined Alaska's mileage plan a few years ago. i've noticed it getting tough and tougher to find the flights I want at the low miles that they use to have.
     
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  6. mhnadel
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    mhnadel Silver Member

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    At the end, they claim cash back is the way to go, since cash is not subject to devaluation. Uh, have they ever heard of inflation?
     
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  7. desamo

    desamo Gold Member

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    1.5% return is only a good deal if that's the best you can do. I assure you I can do better on redemptions than that.

    All rewards programs are inherently inflationary, though, so I'm no longer surprised by devaluations.
     
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  8. PointsCashMiles

    PointsCashMiles Silver Member

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    I think your second statement makes a good point here, we all know that with these reward programs,devaluations (or award cost inflation ) will occur, so we shouldn't be surprised. Of course this doesn't make it any easier to swallow and I'll continue to complain when devaluations occur.
     
  9. MDDCFlyer

    MDDCFlyer Silver Member

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    Life is inflationary. As much as we hate it devaluation will happen. One could expect those to happen - when big chunk of miles comes from none-flying activities (credit card, shopping malls etc) there is a surplus on supply, the demand part will adjust itself.
    Same goes for hotel points - when prices are rising so are the number of points one gets per stay (as opposed to miles who should remain constant from point to point despite what the new United thinks ;-)). Again, surplus on supply will bring to adjustment on the demand side.
     
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  10. Cheaplee

    Cheaplee Member

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    Fidelity Cash Back at 1.5% Visa or 2% Amex is still better. (1) don't have to wait for the end of the and (2) no annual fee.
     
  11. FlyingBear
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    FlyingBear Silver Member

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    I think you'll find plenty of users here showing that they get better return on their particular mileage usage (business/first class rewards).
     
  12. PointHoarder
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    PointHoarder Silver Member

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    True dat!
    However, we're part of a small, select group who actually make the effort to maximize our points/miles/cashback earnings/redemptions.
    The average credit card user isn't going to jump through most of the hoops we do; or understand all the intricacies of whatever card they're using; or take the time to seek out the best redemption option(s).
    For most out there, the occasional buck or eventual free flight is like 'mana from heaven'.
    If only they knew better; and trust me, I've tried to convince many of the errors of their ways, often with little luck.
     
  13. benlucanada

    benlucanada Member

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    to avoid devalution, the best bet is to know what EXACTLY you are looking for and applying the credit cards for those loyalty programs accordingly. say, if you don't fly WW, go with Southwest, their 50k points are much better value comparing with United 50k.
     

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