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Consumers Pay the Price of Loyalty

I confessed in an earlier post, "Use 'Em or Lose 'Em", my obsession with stockpiling reward points and airline miles. There's just something strangely comforting about hoarding hundreds of thousands of points and miles to redeem whenever the urge arises.

The problem is all these points seem to be losing value faster than my stock portfolio lately! And it looks like reward programs will continue to be a prime target for more aggressive cuts in 2009. So, if you've been hoarding points for years in preparation for that "big-ticket" purchase, it's time to rethink your strategy.

If you've got them, I recommend you cash them in now while there are still decent options available.

As the economy falls deeper into a recession and credit-card delinquencies are expected to significantly rise, banks are under severe pressure to stop the bleeding, cut costs, and increase profits. Airlines have been toying with their reward programs for years by adding strange restrictions, shortening expiration periods, and increasing the amount of miles required to qualify for free flights.

Have you noticed how there are never any "saver" awards available on United anymore? They've all mysteriously disappeared, so we're stuck with the standard awards that generally require double the amount of miles to redeem. It's all part of their master plan to get us used to the fact that redeeming miles for a "saver" award is really an added benefit. How annoying is that?

Unfortunately, credit card issuers are now jumping on the bandwagon by scaling back reward programs in a number of different ways. The following are several of the biggest changes announced so far this year:

  • Citi's ThankYou Network rewards program is saying goodbye in March to their popular tiered system that requires a fixed number of points for travel based on ticket prices. The new redemption structure will require 100 points for every $1, which is a huge change. The amount of points needed to qualify for a free ticket could easily be three times more than what is required under the current redemption structure.
  • Amex Delta SkyMiles cardholders can no longer earn double miles for shopping in a broad range of spending categories.
  • The new Capital One No Hassle Rewards card comes along with a spending threshold of $1,000 a month in order to qualify for double miles on anything spent in excess of the limit. Like Citi, they are also adjusting their travel rewards program to require more miles for free flights.

I hate to admit the time has come to give up my obsession, but I think the best option right now is to redeem all the points and miles I possibly can and then switch to a straight cash-back card. My Amex TrueEarnings Business Card from Costco provides up to 5% cash back on certain purchases. And while hoarding points and miles will be tough to give up cold turkey, cash will always be king in my wallet.

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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