DENVER, Colo – The “golden age” of travel rewards credit cards may soon be over.
Soaking up the sun on Waikiki Beach or perusing the streets of Paris are dream trips for so many people. The hefty price tag of plane tickets and hotels can be a nightmare though. So over the past few years, some have turned to credit card points to pay for trips instead.
“It’s very possible to take a free vacation each year that would include flights and hotels,” credit card expert Jason Steele told FOX31.
Steele has been digging into credit card rewards systems for the past decade and is a senior contributor at The Points Guy, a blog that teaches people how to best utilize rewards for free travel.
“I haven’t paid for travel in years. I travel frequently across the country and around the world with my family for free,” Steele said.
Thousands and thousands of people now do the same. It is possible to earn tens of thousands of points on purchases you already budget for like insurance, gas and groceries without it costing any extra money. In return, rewards can be redeemed for hundreds or thousands of dollars.
The problem is, a lot of credit card customers are now signing up for cards and only spending enough to get the bonus points and then dumping them. Banks are then spending money on your free travel without collecting any interest or extra fees.
“Most experts I talk to say this isn’t really sustainable,” Steele said.
Cards like the Chase Sapphire Reserve have already slashed sign-up bonuses from 100,000 points to 50,000 points. And travel partners like Korean Air, which was a popular redemption option for free tickets to Hawaii, has stopped accepting Chase Ultimate Rewards points altogether.
“We might certainly be at peak credit card rewards. We might actually look back at 2018 and 2019 and say wow, this was the golden age of earning credit card rewards,” Steele said.
While he says some sign-up bonuses have “receded slightly” and award redemptions are becoming increasingly difficult to score, Steele urges consumers not to worry.
“I wouldn’t worry too hard,” he said. “Over the years we see something called ‘devaluation’ and what that means is that this year you’re likely to have to spend more points or miles to get the same trip you might have a few years ago.”
While that may sound like a negative thing, he says the opportunity to now earn more miles is greater than the effect of devaluation.
For example, a roundtrip flight to Hawaii might cost 20 percent more points today than it did in 2016. However, he says, at that time it was normal to earn just one point per $1 spent. Now, for savvy rewards consumers, it is common to earn a minimum of 1.5 points per dollar.
“That doesn’t sound like a lot but that’s 50 percent more than we’re used to, at a bare minimum,” Steele said.
Some cards offer even higher earning opportunities ranging from two to six points per dollar or more.
“A new card that was revamped this year, the Gold AmEx now gives you four points per dollar at grocery stores and restaurants, which is fantastic,” he said.
The increased opportunity to rack up points offsets the devaluation of the points and often the consumer comes out ahead.
“The bigger concern is you might be missing out if you pay your balance in full, avoid interest, but are not doing everything you can to earn as much valuable rewards as you can,” he said.
As banks and credit card companies continue to compete for space in your wallet, Steele says their rewards structures will continually change. The key is you have to change your points strategy and your wallet along with it.
“You might want to go through your wallet,” Steele said. “It’s time to consider upgrading that card to a different product or perhaps even closing your account in the same way you would trade in your cell phone or your computer every few years.”
You should only use credit cards to get travel rewards if you can pay off your full bill each month. If you carry a balance and build up interest, the “free” trips end up costing you more money in the long run.AlertMe