You've Been Warned: Experts Say Saving Your Credit Card Points Might Be A Waste Of Money

Credit cards that offer cash back or reward points have a strong allure. Building up a reserve of points to spend on travel or other purchases brings some excitement into the humdrum of credit account management. However, there's a dark side to cash-back credit cards, and cards that offer other rewards pose their own problems as well. Nick Ewen, the senior editorial director at the financially focused travel advisory outlet The Points Guy, recently told CNBC that banking points is actually a problematic approach that users should rethink. He warns that credit card companies can alter their rewards policies as they see fit, which means your accumulated points could be substantially devalued at any given time.

Ewen notes that the Trump administration's recent floating of a 10% interest rate cap could potentially hinder the value of credit card holders' points: The average rate on new cards issued today is roughly double that figure, so this change could significantly impact card companies' bottom lines and force them to alter rewards policies to compensate. However, Ewen also says that points tend to lose value over time, anyway, thanks to other fiscal constants like inflation. Points don't accrue interest or other value enhancers, so sitting on them can ultimately devalue the yield. He says, "The idea of using your points now keeps money in your pocket to be used in other situations. 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."

The most efficient way to utilize your credit card rewards points depends on your individual circumstances. However, if you have a particular purchase in mind that you could put points toward sooner than later, Ewen recommends doing that instead of saving them for a larger trip down the line. While he also says having enough points set aside for emergency purchases like an impromptu travel expense isn't the worst idea, even this potential value could be negated if you're paying additional fees just to use the card.

The potential losses you could incur by not using your points will only compound if you make other avoidable credit card mistakes as well. For example, maintaining a revolving card balance is one bad credit card habit that plagues the upper class and the average shopper alike. Failing to pay off a credit card in full each month results in interest charges being added to your total bill. If the aim is to get something for free by using a particular card instead of your debit account, that goal falls totally flat once interest begins to rack up. As of 2022, the Consumer Financial Protection Bureau reports the average American household spends around $1,000 per year on credit card interest and fees. Paying that much extra to use your credit card on a regular basis could easily undo whatever supposed benefits it may allow you to access.