In which I defend hoarding points against people who advocate “slow and steady,” because I don’t think you can ever have more points than you need.

Disclaimer: We’re dealing with a political situation that makes it borderline crass to talk about first world problems like which first class is best or how to avoid <GASP> flying in economy when there are people who would strap themselves to the wing of a plane just to find refuge in this country if they could. That being said, I also believe that people can think about more than one thing at once, and that me writing about luxury travel and capitalist trappings like credit card loyalty programs is not going to trade off with the volume of necessary journalism devoted to covering current events. However, I would encourage you to support organizations that help refugees, the ACLU, or independent journalism outlets such as the New York Times, Washington Post, or The Guardian, all of which need all the financial support they can get right now. Finally, if you didn’t come here to hear about my politics, then leave, because I’m not going to hold back just because “this is supposed to be a points and miles blog.”

That’s it, I’m fed up with the advice that you shouldn’t try to get more points than you need. Too many people say it, and it’s a terrible idea. It’s true that hoarding for its own sake is dumb – obviously you should use your points to travel, rather than avoiding trips in order to preserve your balance. However, if you’re like a lot of people and only take big trips a couple times a year, you’re likely to earn a lot more than you burn. The argument is that, because miles can only decrease in value, you want to minimize how many miles you’re holding, because they’ll never be worth more than they are today. There’s one major problem with this argument: points earning opportunities deteriorate faster than miles devalue. Your miles will be worth more post-devaluation than if you had nothing at all.

Let’s look at a specific scenario. Assume you’re like me and barely ever fly American airlines. As a result, you’ve never paid much attention to AAdvantage. Two years ago, Citibank had increased bonuses on a couple of AAdvantage cards, and it was possible to earn 155,000 miles in a fairly short period of time. Then AAdvantage devalued – let’s put a round number on it and say the points became 20% less valuable. Now, anyone who took advantage of those limited-time bonuses has an account full of points, but the purchasing power is lower now – it’s equivalent to 124,000 “net points” (that’s 20% off 155,000).

I didn’t take advantage of any of those deals, because I ignored American Airlines altogether. I didn’t want to hoard a bunch of points, and I was proven right in terms of the conventional wisdom when the big devaluation happened. But let’s imagine I now need 124,000 AAdvantage miles for an award I want to book. How do I get there? Citi has imposed a 24-month restriction on receiving the sign-up bonus within a card family, not just per card. Even if they did offer increased bonuses on AAdvantage cards, I’d only be able to get one every two years. That means that, because I waited, I have a much harder path to the post-devaluation net points I would have had if I had decided to hoard points. It’s for this reason that I jumped on the Barclay Aviator Red offer, since 40,000 points for no minimum spend is a great deal. Who knows how long this offer is going to be around – maybe forever, but maybe it goes away in a couple months. Either way, I now have a stash of 40,000 AAdvantage miles that may lose value over time, but it won’t go to zero.

Additionally, there’s no evidence that increased offers necessarily follow devaluations. Customer acquisition is up to the banks, which are buying the miles at a set price from the airlines. Devaluations are up to the airlines based at least in part on the amount of miles in circulation. It stands to reason that as programs become devalued, consumers would require more miles in order to open credit cards, but I don’t think the general customer for these cards understands the relative value of airline miles in this much detail, and I do think banks realize this. Otherwise you would have seen Citi offer way bigger bonuses on AAdvantage cards after the devaluation, and they didn’t. That’s why there’s really no reason to wait until after a devaluation to apply for big bonus, since there’s no guarantee you’ll be able to apply for it at all.

The bottom line is that it’s harder now to earn AAdvantage miles than it was before Citi imposed their restrictions, so even people who had no immediate use for AAdvantage miles are still doing better than someone who waited because they were told not to accumulate more miles than they thought they would need.

Also, raise your hand if you’re so good at forecasting your travel habits that you always know exactly how many miles you’ll need. I certainly can’t. In fact, when I first started the blog, I had a page about where I was planning to take trips, and how I was going about earning the points to get there. Problem was, it was out of date within a few weeks. Things are always changing, and sometimes trips come out of nowhere. I just booked a trip to New York, and thankfully I had a big stash of JetBlue points that I could use on a Mint seat for the return leg. Conventional wisdom would have told me not to invest my time and money taking a round-trip JetBlue flight in order to qualify for the 75k points match promotion, but I did it on the chance that my plans changed and I all of a sudden had a need for the points.

What about 5/24? This is one area where people who were slow and steady were rewarded by being able to apply for the 100k Sapphire Reserve offer (or 80k Ink Preferred offer, or 85k Marriott offer, but – importantly – not all three). However, for people who are so detail oriented as credit card churners, I think people were blinded by all the zeroes in the Sapphire Reserve bonus. (After all, 70k Ink+ bonuses were not uncommon, and people weren’t absolutely losing their shit over that, even though it’s nearly as good.) Let’s say you moved really slowly, and you got a 40k Sapphire Reserve and a 15k Freedom offer (since that’s the combo everyone recommends), plus a 70k Ink+ offer and a generic 50k offer from another bank. Then the Sapphire reserve was the fifth card in two years, bringing the grand total up to 275,000 points. That’s a lot! But have you earned more than 275,000 points in the past two years? Probably. And that scenario above assumes no hotel co-brand cards, no airline co-brand cards, and only one Amex. That customer didn’t have the flexibility to jump on the 100k Platinum bonus when it was around for a couple days, because they were playing it really slow and steady in order to get the Sapphire Reserve bonus.

I got lucky in that I was able to get the Sapphire Reserve bonus anyway, but I would still trade it for all the other points I’ve raked in by not trying to limit applications and stay under 5/24. I also was aggressive with cards (such as the Ink+) that were rumored to go under 5/24 in the future, even though I didn’t immediately need the points from those either. Good thing I did, since I get a lot of value out of the Ink’s 5x categories, and those would be closed to me now if I had waited.

Additionally, the introduction of the Sapphire Reserve highlights a rare instance in which the value of points actually does increase, since they can be redeemed for 1.5 cents toward travel. That means that anyone with a big stash of Ultimate Rewards points suddenly had more purchasing power for their points than before that card was introduced. The enhancements to the Amex Business Platinum card are another example of this, where all of a sudden points were worth 2 cents toward first class airfare.

Finally, there’s the case of the SPG/Virgin/Alaska menage-a-trois that just happened. A 50% bonus on purchasing SPG points, a 20% transfer bonus to Virgin America at 1:1, and a 1.3x conversion rate to Alaska made for some very cheap Alaska miles. I don’t have any plans to use a bunch of Alaska miles, but I wanted to get in on this, because I was afraid the opportunity would dry up. And it did, pretty quickly, when SPG suspended transfers to Virgin. As for the transfer to Alaska, I probably could have held onto the Virgin points, but I didn’t want to risk the ratio changing suddenly. Plus, I’m a lot less likely to need points in the scenarios where Virgin represents a better value than the other way around, so I was willing to sacrifice flexibility in exchange for certainty that I’d get the full 1.3x transfer ratio. In the end, I spent $525 on a bunch of Alaska miles I didn’t need right away, but it seemed like a good opportunity at the time, and now that opportunity is gone.

Bottom line is that I hoard points (or more accurately, I collect points without an immediate use in mind), and I don’t think it’s the wrong thing to do. I have six-figure balances in both Alaska and Delta with no immediate use in mind, so I’m definitely at risk of a devaluation. Still, like I keep saying, those points will always be worth more than no points. Clearly the best way to get value out of your points is to earn when the bonuses are high and then burn before the excess supply of miles prompts a devaluation. However, if you don’t have opportunities to burn, I absolutely don’t see that as a reason to deemphasize earning. 

Who agrees with me? And who thinks I’m dumb for exposing myself to so much devaluation risk? Who thinks I’m dumb in general?

9 thoughts on “In which I defend hoarding points against people who advocate “slow and steady,” because I don’t think you can ever have more points than you need.”

  1. I was with you until you were paying hundreds of dollars for miles you don’t need. I would only do that if I were living hand-to-mouth with my miles.
    Peace of mind that I won’t have to pay for flights if I feel like or need to go somewhere is definitely worth the occasional devaluation of hoarded points.

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    1. I was definitely on the fence when I bought the SPG points, and I considered not putting it in the post because laying out cash is different from earning points for spend rather than cash back. This is the only time I’ve ever bought miles, and it’s because I felt that it was unlikely I’d ever get Alaska miles for that cheap again. I also had some extra money from selling some things on eBay, which made it easier to pull the trigger.

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  2. RIght there with you. I’m on my second year of the Companion Pass from Southwest, so Rapid Rewards are the most useful to me at the moment. Has that stopped me from accruing a million points in United, Alaska, American, and SPG? Hell no! I know I’m going to need them one of these days, and I couldn’t get more Southwest sign up bonuses if I tried! (Thanks 5/24…)

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  3. It is eerie how much we agree on things! I think this is the totally right frame of mind, especially with regards to 5/24. I hope to be sitting on a stash of 500k MR next year (in addition to plenty of miles and hotel points), and the value I get for those points far outweighs the benefits of staying under 5/24 (unless you’re a casual churner, which is totally fine). I think a lot of people let fear of missing out cloud their judgement for signup bonuses.

    (I do quibble a bit with the specific values – for example, you can get matched to 60k AA miles on the Citi AA Plat at near 100% success and there have been a surge in leaked Citi links without 24 month language recently, so it’s still possible to accrue lots of AA miles — but only at this moment in time). I think the point stands regardless, though.

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  4. I am in general agreement with everything you’ve written here. I like to disagree with what’s often touted as “conventional wisdom” to earn and burn and not accumulate large point/mile balances. I generally value redemption options more than any incremental devaluations that come along.

    I will also say that “hoarding” flexible point currencies (like UR, MR, TYP, SPG, and some might argue Alaska since they have so many code shares) is almost always advantageous. While there’s always a risk of devaluation in all travel currencies I think you were wise to point out the subtle UR and MR value increases with the Sapphire Reserve and Business Platinum cards. As big banks battle for wallet-share they may sweeten their points with some added benefits to woo new customers or encourage more spend for existing customers.

    Now, one point of concern is related to accounting. As these businesses see unredeemed travel currency accounts increase they also see a growing liability that negatively affects their financials. Taking American as an example, they are more than happy to negotiate a higher purchase price/mile to credit card partners Citi and Barclays because they get incrementally more revenue for each mile sold. However, if those Citi/Barclays customers hoard their miles, then American’s liability of unredeemed miles grows. The easiest way American can reduce the growing liability is to devalue their points. In my mind I see someone at American looking at a spreadsheet showing a dashboard of unredeemed miles and saying, “Man, we’ve gotta make people use more miles so this liability gets smaller. Let’s roll out another devaluation.” All this is to say that as more people bank more travel currency it will likely lead to more devaluations more frequently. This won’t change my behavior but it’s a reality we all need to face.

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  5. You can never have too many points– yes. But if you aren’t redeeming them or otherwise using a card’s benefits then you should be doing cash back or a currency you WILL use. And every airline and hotel card you get makes it harder to be approved for something you may actually benefit from. Sure, a Barclay Aaviator with 40k points for no spend sounds great– but I’d rather have an A+ with as good as $500 bonus. I’ll actually use that rather than a bunch of miles with no desire or knowledge to use and no clear way to cash out.

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  6. Always baffles me when certain dubious bloggers blather on about “earn and burn”, then tell us they pay for tickets and use cash and points because they are short on points. WTH?

    There is no excuse to pay cash while current negative cost points-generating opportunities remain.

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  7. Another useful, thoughtful post. The “hard to predict” thing is so true. Stuff that seems not-so-valuable becomes valuable when you least expect it, etc. Anyhow, great blog; we just saved a couple hundred bucks with acute points and cards jiujitsu yesterday… and passed it along to the ACLU this morning. Travel well!

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  8. Yes, the earn and burn crew are more worried about their own bottom line than their readers’. In many cases, they are sitting on 6 or 7 figures of their favorite kind of points and still accumulating while they tell other people to burn their points. Even those that are professed finance/economics guys don’t pay any attention to options value except to value transferable points. If you earn and burn to the point where you only have Hyatt points, for example, you need to use Hyatt points wherever you are going, even if they are a lousy use of points, so you will have to get no better than average use of your points or pay cash. On the other hand, if you have a stash of Club Carlson, Hilton, Hyatt, Marriott, IHG and SPG points, you can choose whichever one offers the best value for any given stay, and should, pretty much always, get top quartile value for your points and almost never have to pay cash. That makes every point of a hoarder worth more than the exact same points of an earn and burn artist, more than offsetting devaluations. Historically, in my case, I have gotten more than 4 cents per SPG point, nearly 4 cents per Hyatt point, 1.3 cents per club Carlson point, and more than one cent per Hilton point. These are all much higher than average because I have a substantial store of all of them, so I can use each them only when they are particularly valuable..

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