If enacted, President Donald Trump’s proposal for a temporary 10% cap on credit card interest rates could change many policies for borrowers. Among them: how issuers decide to value credit card points.
If you’ve accumulated any significant amount of credit card points, you should probably spend them now — but not because of the potential for a 10% interest rate cap, says Nick Ewen, senior editorial director at The Points Guy.
“This is not a reason in and of itself to spend your points,” Ewen says. “Even before this was announced, you should be spending your points.”
Credit card points — rewards earned from card spend that can be redeemed for benefits like travel, cash back or merchandise — are funded mainly by fees paid by merchants on each transaction, along with interest and sometimes fees paid by cardholders, Ewen says.
That means a 10% interest rate cap could reduce issuer revenue. To offset that lost income, reward programs may lower the amount of points you can earn from spending on the card, increase redemption costs or offer fewer perks, Ewen says.
However, putting a timeline on when points could start to lose their value if an interest rate cap is implemented is a “fool’s errand,” because of all the uncertainty around Trump’s proposal, he says.
Why you should spend your credit card points now
There are two main reasons you should be consistently spending your points, Ewen says:
- Credit issuers can change their policies
- Points tend to lose value over time
Hotel, airline and credit card reward programs can change their redemption policies at will, and they don’t necessarily need to give you advance notice of any upcoming changes, Ewen says.
“You don’t know what the future is going to hold,” Ewen says. Stockpiling points “can really come back to bite you if something changes significantly in the program that you are holding them in.”
Changes rarely increase the value you can redeem for your points, Ewen says. Whether it’s beneficial redemption rates or options to transfer your points to airlines or hotel loyalty programs, if your credit card comes with a perk you have active plans to use, Ewen says it may be wise to take advantage now.
Additionally, unlike money you put in a high-yield savings or investment account, your points don’t earn interest. This means their real value erodes over time as prices rise — $100 worth of points with an airline will still be worth $100 next year, even if flight prices increase, Ewen says.
“The idea of using your points now keeps money in your pocket to be used in other situations,” Ewen says. “Sure, you can earn more through spending and other activities, but you’re not going to see a balance increase just by leaving it there.”
How many points is too many points?
The number of points you should keep on hand will vary by person, and it largely depends on how many opportunities you have to redeem them, Ewen says. It can be useful to have some points saved for emergency situations like last-minute flights, he adds.
For those going on multiple domestic and international trips in a year, it may make sense to hold onto more points. Those who travel less frequently should start thinking about spending their points once they hit the mid to upper five-figure range, he says.
It’s very common to see people saving points for a big trip like a honeymoon, Ewen says. Keep in mind that points can often be redeemed months ahead of time, and if price drops happen, especially with flights, you may be able to rebook and receive the difference back in points, though you should check with your provider first, Ewen says.
If you have points that can cover a flight right now, go ahead and spend your points on it, he says: “That is going to be your best option.”
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