Rookie Sunday: Is it better to save / bank points or to spend them ASAP?

Welcome to a regular feature on the Renés Points blog. This blog series covers in a “rookie” way either a Delta or travel related theme and attempts to break down to a basic level each topic. You can read up on all the previous posts HERE. Now on to this featured topic.

There are folks who literally have millions of points and hardly ever spend them. They take advantage of every opportunity to collect, add or even buy points when they are offered at discounted prices. These types of frequent flyers could show up at an airport today and fly anywhere, in 1st class, and stay in a suite at the best hotels in the world for months. Sounds amazing right? But is this wise?

Before we begin let me start with a disclaimer and a snapshot of my point balances. Each year I collect hundreds of thousands of points and normally, across all programs, have 1 to 2 million-ish points on-hand.

Next let’s make a clear differentiation between points. We are not talking about cash back points because they are, well, cash. Nor are we talking about one of my favorite types of points like Barclays Arrival+ that is much like cash. With these two you are often simply using something like Google Flights to track the historic lowest price for a flight from A to B and buy when you are getting the best deal. We are thus talking about either hotel or airline points minted by them in this discussion.

Long term hoarding. Let me start with this one. “Back in the day” it was not uncommon for frequent flyers to save points, often for years, to spend once they neared or reached retirement age. After all why spend points when young when you have solid income and points are flowing freely – often a perk of company paid for travel. This was, at one time in history, a wise move. But what about today?

One of the biggest reasons the above is a really bad idea is the flat out dishonesty that keeps creeping into company minted points. More and more programs are following Delta’s slimy move to either remove award charts (that they sometimes still use) and thus the value of your points could fall faster than bitcoin. Saving only is wise if you can expect the item saved retains its value over time. As just one example, a Delta business class round trip ticket to Europe from the USA a few years ago was 100,000 points at the lowest level (Level 1) – that ticket will now cost you 172,000. A few more years and your “banked” SkyMiles will have lost half their value. Yuck!

Thus my advice, when it comes to most company minted points is only earn an amount that you can reasonably burn over a few years time. Beyond that time range the risk to hold is simply to high. There are some negative implications of this strategy – possibly over paying to burn the points – and this must be balanced with the need to burn. In other words you do not want to, by over paying, build in years of program devaluations.

A balanced portfolio. The ultimate advice is what most investment advisors tell you, that is, don’t put all your eggs in one basket and have a balanced portfolio. Also, be ready to “take profits” when it is smart rather than hold forever. The same goes for points. Harvest all types of points when you can but be sure to burn them at good value when you can. That is how I literally save tens of thousands of dollars a year in travel costs in air, ground transport, hotels and cruising! – René