Maximize your credit card points now, advises an expert—regardless of any potential 10% interest rate cap being introduced.
If President Donald Trump’s suggestion for a temporary 10% cap on credit card interest rates becomes a reality, it could significantly impact policies affecting borrowers. One area that stands to be affected is how credit card issuers value reward points.
If you’ve managed to gather a substantial number of credit card points, it might be wise to use them sooner rather than later. However, this advice isn’t solely based on the looming possibility of an interest rate cap, according to Nick Ewen, senior editorial director at The Points Guy.
"This alone shouldn’t drive your decision to spend your points," Ewen explains. "Even before this proposal came up, you should have been utilizing your points."
Credit card points are rewards earned through spending on your card and can be redeemed for various benefits like travel, cash back, or products. These rewards are primarily funded by fees paid by merchants for each transaction and interest, sometimes supplemented by fees charged to cardholders.
With a 10% interest cap in place, issuer revenue could take a hit. To make up for this potential loss, reward programs might respond by reducing the number of points earned per dollar spent, increasing redemption costs, or providing fewer perks overall, Ewen warns.
However, predicting when points might start to depreciate in value if this interest rate cap is implemented is likely a futile exercise, given the uncertainties surrounding Trump’s proposal.
Reasons to Use Your Credit Card Points Now
Ewen outlines two compelling reasons why you should regularly spend your credit card points:
- Policy Changes by Credit Issuers
- Devaluation of Points Over Time
Credit card companies can modify their reward policies at any time without prior notification. This unpredictability is crucial because future changes could significantly affect the value of the points you've accumulated.
"The future is uncertain," Ewen cautions. "Hoarding points can backfire if there’s a significant shift in the program you’re relying on."
Typically, changes to these policies do not benefit cardholders. Whether it’s related to improved redemption rates or the ability to transfer points to airline or hotel loyalty programs, if your card offers certain perks that you plan to take advantage of, it may be prudent to act while you still can.
Moreover, unlike funds held in a high-yield savings account or investment portfolio that accrue interest, your credit card points do not gain any interest over time. This means their purchasing power diminishes as inflation occurs—$100 worth of points with an airline will retain its nominal value next year, even if ticket prices rise, Ewen notes.
"Using your points now can save you money for future expenses," Ewen suggests. "While you can accumulate more points through spending and other activities, simply leaving them unused won’t increase your balance."
How Many Points Should You Keep?
The ideal number of points to maintain varies from person to person and largely hinges on how often you can redeem them, according to Ewen. It’s often beneficial to save some points for emergency scenarios, such as booking last-minute flights.
For individuals traveling frequently—both domestically and internationally—it may be logical to retain a larger stash of points. Conversely, those who journey less often should consider using their points once they reach mid to upper five-figure totals, he suggests.
Many people tend to conserve points for significant occasions, like honeymoons. It’s important to remember that points can frequently be redeemed well in advance, and if fares drop, particularly for flights, you might be able to rebook and reclaim the difference in points; however, it’s advisable to check with your provider beforehand, Ewen adds.
If you possess enough points to cover a flight right now, don’t hesitate to use them: "That’s going to be your best choice."
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